Surface Transportation: Moving into the 21st Century

Below is a raw (and likely hideous) rendition of the
original report.
(PDF)

United States General Accounting Office
GAO Staff Study
May 1999
SURFACE
TRANSPORTATION
Moving Into the 21st
Century
GAO/RCED-99-176
Summary
The nation’s federal surface transportation policy has become increasingly
complex, changing from a narrow focus on completing the nation’s
Interstate highway system to a broader emphasis on maintaining our
highways, supporting mass transit, protecting the environment, and
encouraging innovative technologies. Surface transportation in the 21st
century will differ from transportation today, and demographic
changes will spark much of this change:
• The nation’s population will increase by 60 million through 2020, resulting
in 60 to 70 million more vehicles using the nation’s surface transportation
network.
• The rapid suburbanization of population and employment will continue.
Since 1970, 86 percent of the U.S. population’s total growth and the
majority of all retail space is now located in suburban areas.
• The population will age. From 1995 to 2005, the number of Americans in
their 50s will increase by 50 percent, presenting different travel patterns
and needs.
These changes will move surface transportation in new directions that are
likely to require new policies and approaches. According to a leading
transportation expert, failing to respond to these new trends in the 21st
century could send a negative ripple through the whole fabric of the
American standard of living.
To understand these new challenges and assess the potential directions
that surface transportation policy could take to address them, we
sponsored a conference entitled “Moving Into the Future: Surface
Transportation in the 21st Century” on January 26, 1999. The conference
brought together transportation experts from the Congress, academia,
state departments of transportation, local planning agencies, research
institutes, investment banks, other private companies, and the federal
government to discuss the future of surface transportation in the United
States. These experts offered provocative thoughts on the wide-ranging
challenges and issues facing current policymakers. Their remarks also
provided an early look at surface transportation issues that the Congress
might debate when authorizing legislation succeeding the Transportation
Equity Act for the 21st Century (TEA-21). This report summarizes the future
surface transportation issues based on the views transportation experts
presented at our conference.
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Summary
According to our conference participants, the nation’s surface
Challenges to Surface transportation system faces significant demographic, lifestyle, and
Transportation economic challenges and demands. In the future, busy passengers and
businesses will increasingly press for improved transportation services
that give them cost-effective means to move themselves and their goods
rapidly and reliably through the transportation system. For busy
Americans, the car will remain the dominant mode of travel and will
continue to be viewed not as a problem but as the solution to their
transportation needs. Our participants characterized Americans’ views of
cars as faster, safer, more comfortable and flexible, cheaper, and better
able to link scattered departure and destination points than other forms of
transportation. For the nation’s businesses, moving freight quickly through
the transportation system will be vital to their survival in a global market
that poses unrelenting productivity demands. In addition, commuters,
leisure travelers, just-in-time freight shippers, and older travelers all will
have different trip patterns and travel needs, thereby placing more
complex demands on the transportation system.
Conference participants had the following observations regarding the
challenges that the traveling public and transportation policymakers will
face in the 21st century.
• The surface transportation network is aging, and the existing
infrastructure has not been adequately maintained. Traditional responses,
such as constructing new highways, are being foreclosed by public and
environmental pressures. In addition, state and local governments appear
slow in directing more dollars to preserving the infrastructure. Without a
significant change of direction, there will be a growing mismatch between
the transportation system and travelers’ needs.
• Highway congestion—particularly in very large urban areas—will be a
continuing issue. Although average commuting times have not changed
substantially for years, several participants noted that the public perceives
congestion as worsening and producing adverse economic impacts.
Population growth and more households with multiple vehicles are likely
to outpace states’ efforts to expand highway capacity. One conference
participant concluded that congestion is not a problem that can be
solved—it results from the public’s travel and lifestyle choices. Families’
desire for a wide range of housing and work choices—often in low-density
areas—and the ability to combine several different purposes on a single
trip will continue to generate considerable traffic congestion.
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Summary
• Social and environmental concerns are becoming greater constraints on
the system’s expansion than money. People increasingly are concerned
about how transportation investments affect their quality of life and
expect results that improve both their mobility and their local community.
The citizens who attend local planning meetings are looking for results
from transportation investments that differ from those in the past (such as
more bike paths or green space). However, reconciling transportation and
environmental policies is increasingly difficult—often producing gridlock
at state and local levels and delaying needed changes to the system.
• Future mass transit policy may have to acknowledge that only a few large
urban areas contain the majority of transit users. For example, the 10
largest mass transit systems carry 60 percent of all the nation’s transit
riders; the other 5,000 operators carry 40 percent. Federal transit funding
does not correlate with this ridership concentration; established transit
markets where ridership could be increased do not receive proportional
funding. Mass transit also will be called on to address the needs of
low-income households that cannot afford cars as well as the needs of the
disabled and elderly.
• Freight shippers are major transportation users and vital to the nation’s
economic competitiveness. Moving freight in and out of U.S. seaports will
grow about 6 percent annually and double or triple in total volume by
2020. The current surface transportation network does not allow freight to
move easily between highway, rail, air, and maritime transport. In
addition, the public sector often does not understand the needs and
problems of moving freight nationally or regionally. Freight and
intermodal problems will thus require considerably more attention by
transportation agencies in the future.
• With few exceptions, the public cannot obtain information about the
quality and level of transportation services across states and regions.
Currently, states handle and report on highway accidents and incidents in
different ways that can have major impacts on travelers. The public needs
additional performance information so that it can develop reasonable
expectations about how public assets are expected to perform.
Our conference participants urged federal, state, and local policymakers
A New Paradigm for and agencies that are responsible for surface transportation to adopt a
Surface new paradigm—one that focuses on the people who use the transportation
Transportation system, including their needs and expectations. Unlike the 20th century
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Summary
mission of constructing the transportation system that exists today, future
transportation policies must shift transportation agencies’ focus to
managing the system for greater efficiency and delivering better services
for the users. Such focus will require transportation policymakers and
agencies to rethink their strategies for achieving transportation goals and
to collaborate more extensively with the private sector to meet travelers’
complex transportation needs. These challenges are especially important
because transportation and the ability to move goods and people will be
vital to our economic survival in a global market.
The conference participants provided several examples of how a focus on
users would shape future transportation policies and services.
• Surface transportation policy must reflect Americans’ heavy reliance on
cars to meet their mobility needs. Rather than undertake complex,
controversial programs to get people out of their cars, policies should
concentrate on local experiments, such as greater ride sharing, new
community designs, or enhanced emphases on urban mass transit or
passenger rail. A participant observed that national mandates are
unpopular and unproductive approaches for reducing problems associated
with the automobile.
• By linking transportation policies and services to customers’ needs and
preferences, the primary mission of transportation agencies will change
from building highways, bridges, and mass transit systems to moving
people and goods. The measurement of performance success will also
change. Instead of measuring the amount of additional capacity built,
policymakers will focus on how transportation improves personal
mobility, expedites shipping, and speeds the transfer of information.
• Developing new services based on customers’ needs and input will be a
substantial departure from the largely bureaucratic decision-making that
characterizes transportation organizations today. In addition,
collaboration among federal, state, and local transportation agencies will
be important because no single transportation agency or level of
government will be able to independently meet travelers’ complex
transportation needs in the future.
• Transportation managers will need to bring other public agencies into the
policy and decision-making process. Transportation policy often involves
other government entities—environmental, housing, education, and
energy. However, these entities may not work together to meet common
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Summary
objectives. For example, local agencies that provide water, sewer, and
educational infrastructure are seldom involved in transportation decisions.
As a result, infrastructure investments may not be coordinated and could
often duplicate each other.
• Other nations are using public-private partnerships to put their
transportation systems in a better position to meet global competition,
according to a participant who surveyed international practices. In several
nations where the private sector already delivers transportation services
and maintains facilities, public-private roles are being reassessed to
provide greater efficiency. These nations are experimenting with increased
private-sector involvement in transportation services. They are using
competition to make the transportation system more efficient and
cost-effective, reducing regulations to encourage innovation, retaining
transportation policy and management as a government role and using the
private sector for maintenance and services, and seeking accountability
through performance measures. In contrast, the United States has made
modest moves to enhance the nation’s global competitiveness by
overcoming barriers that limit public-private partnerships. A participant
characterized the public sector as superb at creating procedures and
process but poor at deployment—the bottom line for private companies.
Similarly, private companies are action oriented and do not understand or
appreciate a funding process that requires 10 years to complete a surface
transportation project.
• Freight stakeholders must become full partners in making transportation
policy so that surface transportation investments are linked to freight
needs. In 1994, business and industry spent $421 billion to move 3.5 trillion
tons of freight over transportation networks totaling 2.3 million miles.
Facilitating freight users’ and suppliers’ involvement in transportation
policy will enhance the nation’s ability to move freight seamlessly across
different transportation systems. In addition, manufacturers and freight
companies regard the Department of Transportation’s (DOT) “stovepipe”
organization as a major obstacle to working with the federal government,
a participant reported. They find it difficult to discuss intermodal projects
or emerging issues—such as how the new megaships will access U.S.
ports—with a single DOT agency that is responsible only for highway or
maritime issues.
• The conference participants stated that innovation is essential to the new
transportation paradigm—its policy, management, operations, and
services. Currently, ideas and innovation are generated at the state and
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Summary
local levels. Although bellwether states are experimenting with funding,
services, pricing, and relationship innovations, this is not well known at
the federal level and virtually never mentioned in national discussions, a
participant indicated. Another participant proposed that the federal
government reward well-designed state and local innovation with seed
money and other incentives.
• Federal policymakers need to renew their commitment to funding
nationally important research. While TEA-21 substantially increased states’
research funding, it considerably reduced funds for federal research, one
participant stressed. While state research programs focus on short-term,
practical problems, federal research must focus on long-term and high-risk
research, intermodal problems, and transportation policies. For example,
federal research to produce a “post-petroleum” vehicle propulsion
system that would reduce pollution and energy consumption is
increasingly important, a participant observed.
Our conference participants provided considerably more comments and
suggestions for transforming surface transportation policies to a user
focus. Appendixes I through X provide summaries of their remarks.
We would like to thank the staff of the National Academy of Sciences
Transportation Research Board—particularly Robert Skinner and Dr.
Suzanne Schneider—for their assistance in making our conference a
success. Furthermore, we are extremely appreciative to Les Sterman,
Director, East-West Gateway Coordinating Council, and Brian Taylor,
Associate Director, Institute of Transportation Studies, University of
California/Los Angeles, who served as expert discussion moderators for
our morning and afternoon conference sessions. Should you require
additional information on this report, please call me on (202) 512-2834.
The conference was planned and this report was prepared under
supervision of Phyllis F. Scheinberg, Associate Director, Transportation
Issues. Other major contributors to this report are listed in Appendix XII.
John H. Anderson, Jr.
Director, Transportation Issues
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Contents
Summary 1
Appendix I 12
Presentation by Peter
“Jack” Basso,
Assistant Secretary
for Budget and
Programs, U.S.
Department of
Transportation
Appendix II 16
Presentation by Anne
P. Canby, Secretary,
Delaware Department
of Transportation
Appendix III 23
Presentation by
Anthony Downs,
Senior Fellow, The
Brookings Institution
Appendix IV 29
Presentation by James
A. Dunn, Jr., Professor
of Political Science
and Public
Administration,
Rutgers
University/Camden
Page 8 GAO/RCED-99-176 Surface Transportation
Contents
Appendix V 33
Presentation by
Stephen C. Lockwood,
Vice President,
Parsons Brinckerhoff
Appendix VI 40
Presentation by Mr.
David Luberoff,
Associate Director,
Taubman Center for
State and Local
Government, Kennedy
School of
Government, Harvard
University
Appendix VII 51
Presentation by
Bradley L. Mallory,
Secretary,
Pennsylvania
Department of
Transportation
Appendix VIII 56
Presentation by
Robert H. Muller,
Managing Director,
J.P. Morgan Securities
Page 9 GAO/RCED-99-176 Surface Transportation
Contents
Appendix IX 62
Presentation by James
L. Oberstar,
Ranking Democratic
Member, Committee
on Transportation and
Infrastructure, House
of Representatives
Appendix X 72
Presentation by C.
Michael Walton,
Chairman,
Department of Civil
Engineering,
University of
Texas/Austin
Appendix XI 78
Profile of Speakers
Appendix XII 83
Major Contributors to
This Report
Abbreviations
DOT Department of Transportation
FHWA Federal Highway Administration
GAO General Accounting Office
I-95 Interstate Route 95
ISTEA Intermodal Transportation Efficiency Act of 1991
ITS Intelligent Transportation Systems
PennDOT Pennsylvania Department of Transportation
TEA-21 Transportation Equity Act for the 21st Century
TIFIA Transportation Infrastructure Finance and Innovation
Page 10 GAO/RCED-99-176 Surface Transportation
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Appendix I
Presentation by Peter “Jack” Basso,
Assistant Secretary for Budget and
Programs, U.S. Department of
Transportation
“How we meet needs for transportation in the future is critical. It needs to be intermodal, it
needs to be international, it needs to be inclusive, and it needs to be well financed.”
“Even with record levels of investment at the federal and state level, we still fall short of
the projected need. The consequences of failure are extremely clear. Reduced economic
growth, loss of productivity gains, loss of jobs. And a negative ripple that passes through
the whole fabric of the American standard of living.”
I would like to divide my presentation into three segments. First, I would
like to address the environmental factors that we’re likely to face in the
future of the nation. Second, I would like to discuss the needs, as we
project them today, for at least the next 20 years for the future of
transportation. Third, I would like to suggest some financing mechanisms
that we might use to address those needs.
The Future Transportation As we come to the new millennium—enter the new century—we are faced
Environment with economic trends that are global in nature. In the United States, we
also are enjoying an unparalleled economic expansion. Transportation and
effective logistics are vital to our economic survival as we compete in the
global market. Transportation today is about 11 percent of the Gross
Domestic Product. Therefore, how we meet needs for transportation in the
future is critical. It needs to be intermodal, it needs to be international, it
needs to be inclusive, and it needs to be well financed. We also need to
realize that the population of the United States will grow by 60 million
people over the next 30 years, adding substantially to the stress on the
transportation system. I would allow that Americans are really fed up with
the congestion that currently exists. We cannot apply the approach that
we used in the past—simply to build our way to transportation demand.
We need to deal with more than system expansion. We need to deal with
the efficiencies of the total system.
We are also faced with an aging population. That requires changes to our
transportation system, so that we can remain mobile and be well served as
a nation. Productivity demands are unrelenting, and we must meet those
demands to remain competitive in a global market. In that vein, freight
moving through our ports is expected to grow 6 percent annually, doubling
or tripling in volume by 2020. One of the points I want to make here—the
reason I’m touching on ports—is that there is “water surface,” and there
is “land surface.” We tend to think of highways. Highways are a part of
the total system, a key part. But there are other things we need to address
from a federal level. These ports can either be choke points in the future
Page 12 GAO/RCED-99-176 Surface Transportation
Appendix I
Presentation by Peter “Jack” Basso,
Assistant Secretary for Budget and
Programs, U.S. Department of
Transportation
or they can be systems that flow smoothly. To flow smoothly, they need
much more overall infrastructure.
Future Transportation To remain at the unprecedented level of economic growth and vitality we
Needs enjoy today, we must expand our transportation system’s capacity to keep
pace with that growth. We cannot do it by just building our way out. We
must rely heavily on technology and efficiency in our systems in order to
meet those needs. What are the needs? All forms of transportation are
growing. Passenger miles on domestic flights have doubled since 1980. In
the same period, vehicle miles of travel have increased 60 percent, and
ton-miles of freight, 25 percent. With the economy expected to grow
almost 30 percent by the year 2010, we expect these growth trends in
transportation to actually increase exponentially. Against that growth are
studies that show the need for total public investment in airports, air
traffic infrastructure to be about $9 billion annually. The highway system
will require an investment of $46 billion by all levels of government just to
remain at current conditions and get the current performance out of the
system. Our maritime, transit, and rail infrastructure will require even
more billions.
Today, public investment in all transportation infrastructure totals a little
over $60 billion a year. Even with record levels of investment at the federal
and state levels, we still fall short of the projected need. The consequences
of failure are extremely clear. Reduced economic growth, loss of
productivity gains, loss of jobs, and a negative ripple that passes through
the whole fabric of the American standard of living.
We need to begin by realizing that we do, in fact, need financing for the
future. In order to meet those needs and be a player in the world market,
the United States has to come to a new paradigm for transportation. That
is, we must recognize that financial resources for public and private
infrastructure cannot come from these sectors exclusively. In constructing
the Interstate system, we had a unitary purpose. And while it cost a lot
more than it was understood to cost at its conception, the accompanying
growth of user fees provided the revenues that were necessary to make
and get the job done. All of the need for transportation in the future cannot
be simply carved out of the fuel and other transportation taxes. The needs
are too great, and the range of needs too vast. They apply to all sectors of
transportation. That was then, and this is now.
Page 13 GAO/RCED-99-176 Surface Transportation
Appendix I
Presentation by Peter “Jack” Basso,
Assistant Secretary for Budget and
Programs, U.S. Department of
Transportation
What Financing So what are we going to do? We have already begun. So-called innovative
Mechanisms Will Address financing techniques came in the mid-1990s in surface transportation.
Our Transportation Needs? Steve Lockwood and others have talked about these techniques having
become a permanent feature of the surface transportation programs. The
Garvey bonds, as an example, are clearly catching on all around the
country in various places. Robert Muller has talked about Garvey bonds
and what they mean. Like him, I never thought you could sell air, but I
conclude you can. I differ a little with him on state infrastructure banks—I
think that they will ultimately play a significant niche role. What we have
now is a lack of legislative authority to continue to capitalize those banks
as probably the larger issue. Extensions, credit assistance, and expedited
federal procedures have enabled over $12 billion worth of infrastructure
projects to move forward. The new Transportation Finance Innovation
Act—known as the Corbett Act, over here—will be coming on line this
spring. I’m happy to announce that we actually have sprung the
regulations loose from the Office of Management and Budget and will be
coming out with those for comment within the next few days.
It’s change that the federal agencies are primarily looking for and the
source of change that we want to make come about. Contrasting with our
focus on the Interstate system, federal agencies have to change direction.
We have to be a patient investor. We have to be a junior investor, we have
to be an enabler in the process, and we have to understand where they
apply and in what markets. This is not a panacea for all needs, but it
certainly fits substantial niches across the country. This is clearly our time.
This is the time of public-private partnerships that will bring new capital to
the table and allow mega projects, such as the Alameda Corridor, that are
needed to be put in place to actually get off the ground and get built. In
fact, I noted yesterday that the Alameda Corridor has been named the
infrastructure-financing project of the year, which amazes me. When we
first financed it, I thought I was going be named the
infrastructure-financing fool of the year. But it didn’t quite work out that
way, which is good. It’s also about a realization that we need new parties
at the table. I share Brad Mallory’s view that we really do need to work on
readjusting and reporting those relationships. What this is really all about
is being an “out of the box” thinker. It’s a cliché—but it really is what it’s
about. It’s about what economic power can really do.
So what do we need to do? The needs I’ve discussed and what we have
done today expand upon and change the dynamics. Now we have to return
to adopting that new paradigm and making it work. We have to ask
ourselves three questions. Can we learn to give up the idea that public
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Appendix I
Presentation by Peter “Jack” Basso,
Assistant Secretary for Budget and
Programs, U.S. Department of
Transportation
infrastructure financing is the exclusive domain of public agencies? Can
we learn to speak the language of the private financial community? Can
we really continue to be players in a global market?
To the first question, I submit we don’t really have a choice. We can either
go the way of the dinosaur or we can adapt to a new financial
environment—change is healthy. It’s also clear that we can learn to speak a
new language. Our innovative financing initiatives over the past 6 years
have begun to translate public-private financing into a real world result.
There are three major examples that come to mind: the Alameda Corridor,
the San Joaquin Foothills Transportation Corridor, and the Eastern
Foothills Corridor. I could go on and on with intermodal projects, but I
think you get the idea.
In the case of the global market, we must make changes if we’re to
economically survive as a nation. We need to continue to take the steps
that are necessary. These include establishing new partnerships,
developing new legislation as appropriate and where it’s appropriate, and
not developing that which is not appropriate or necessary. They also
include looking to how we can best make this world grow and prosper the
way we want it to.
In closing, we need to recognize the environment that we are in and
recognize that the players and their relationships are changing. Think
outside the box. Be ready to grapple with change and embrace it and make
it happen. Do not be afraid to find that things are different, and they may
be for the better.
Last, but not least, with GAO being a major player in all of this, those of us
who are in oversight roles or the national roles need to do two things.
First, we need to be advocates for those changes that are changes for the
good. Second, we need to be fair and substantial critics of the things that
don’t work.
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Appendix II
Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
“The challenge is to bring together all the infrastructure decisionmakers and identify
vehicles for doing that. It’s insane to be putting the transportation investment in one place,
and the water and sewer investments some place else because you’re going to repeat both
investments in the other location. And that still happens.”
“One of the tools that we clearly need is technology and research—that’s a critical federal
role. It is absolutely critical for us to continue technology and research in terms of
materials, systems, and the kind of analytic work that helps frame problems for those of us
in the states.”
I’ve had my job for about 6 years—for transportation Secretaries,
somewhat of a long tenure. In our business, we deal with many different
things. Delaware’s transportation department is a bit unusual because we
act, in essence, as a county transportation agency. This is because the
three counties in our state have no transportation responsibility. So we
deal with the Interstate Route 95s (I-95s) of the world but also the
subdivision cul-de-sac. And you can guess where I spend most of my
time—it’s not on I-95. In addition, we operate all of the transit in the state.
So we are among the more integrated—along with Maryland, New Jersey,
and Connecticut—states in the aspect of jurisdiction. I will say that this
doesn’t make it a whole lot easier, except that occasionally, the Golden
Rule does help out.
Changing Transportation As I thought about my talk with you, it was clear that transportation is
Roles changing very much. Our state transportation departments’ roles are in
some real transformation. Part of it is driven by some of the things that
Tony Downs described. Part of it is driven by other realities, particularly in
the Northeast, where we have aging infrastructures and mature systems
that are forcing us to do rethinking. As Les Sterman commented about
reaching out to our customers, this causes us to change as well.
Let me talk broadly about the roles in transportation because I think we
have some challenges. As we heard from David Luberoff, one of the
federal government’s main roles is—“where’s the money?” We’ve all just
been through that, we know it all very well, and we look to the federal
level for funds. But I think we also look to the government for a broader
set of goals. At the state level, we certainly do chase the money—we’ve
just submitted our Access to Jobs and our Livable Communities
applications. So the federal programs can indeed lead us in some
directions that we might not go on our own. I think there’s a very
important role there that needs to continue to be played.
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Appendix II
Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
The need versus equity issue probably isn’t going to go away. Since we are
the 49th largest state, as our Governor likes to remind everybody, the need
versus equity issue is very important for us. One penny of our gas tax
raises $4 million and everybody knows that doesn’t get you too much
today, and our gas tax is 23 cents above the norm for states. Money is
always an issue as is the fact of our geographic location. Frankly, if you
want to get from Washington to New York, you’re going to go through
Delaware—and you’d like to have that experience be a good one. We hope
it’s just gotten better with the introduction of Easy Pass.
At the federal level, there are other policies and goals that involve
transportation. We’ve heard about some of them this morning—trade,
welfare-to-work, energy, and a whole range of environmental issues. These
all intersect with transportation in one way or another. So I think that at
the federal level, there clearly needs to be influence in those areas for
those of us in the transportation field.
I would say that more change is occurring at the state level of government.
We’ve had a lot of conversations in the American Association of State
Highway and Transportation Organizations about our role. With the
selection of a new executive director, I think that you will see much more
state movement to try to provide a bigger tent. We cannot do it all, but we
are in a position to articulate some issues both at the state and regional
levels. In Delaware, we have come together with the New Jersey Turnpike
Authority, the Garden State Parkway, the Highway Authority, Atlantic City
Expressway, and the Port Authority of New York and New Jersey on a
single toll system. This is amazing to me. When I was in New Jersey, we
hardly spoke to those independent authorities. The fact that we are now
talking to each other and have become business partners is an indication
of the changing direction that you’re going to see states moving at the
institutional level.
Intelligent Transportation Systems (ITSs) are another area of state change
that relates to all of the Northeast’s transportation agencies in managing
our transportation systems and their operation. It is very much a change in
terms of exchanging information. And it’s not just highway
information—it’s also customer transit and train information. I think there
will be a lot of change, and states are really leading in that arena.
The local governments have a range of responsibilities, and we deal with
them differently in all of our states. In my state, we don’t have any money.
But there are entities that have road, transit, aviation, and port authority
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Appendix II
Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
that the states don’t all participate in. We all have different structures in
that arena, and I think that’s where one of our challenges lies as we move
ahead.
On the private side, the Northeast presents some interesting examples
because of the sale of Conrail to Norfolk Southern and CSX. We have two
railroads now taking over. States’ discussions when that whole deal was
put together were very much on an individual state basis, but the impact is
clearly regional for us. My Governor and I made it very clear to both of
those carriers that we wanted trucks off our roads and that they’d better
be organizing in a way to make sure that that happened. We were talking
about how you allocate limited capacity: is a truck that’s hauling orange
juice from Florida to New York better on I-95 or the railroad? We’d
certainly like to see it on the railroad, although there are some people in
my department who disagree with me because they see the toll revenues
going down.
We need to be figuring out how to come together and make these
trade-offs. For example, we never think about pipelines because we can’t
see them—they’re out of sight, out of mind. They are very much a part of
our transportation system, but one that the public sector has hardly
thought about. Aviation, water, and truck issues all have significant private
components—the same for all of us who own and operate automobiles. So
there’s a huge mix and Amtrak is somewhere in between public and
private.
Transportation has a mix of ownership and operating responsibility—this
makes for what I call the silos of the transportation network. We do not
yet have a totally integrated system, which is why I think we’ve had so
much conversation about intermodal transportation over the last years.
But users are not thinking about all these pieces. They are just trying to get
from some place cold to some place warm—if they’re trying to go to
Florida for a vacation. They don’t care that there’s 10 different people
operating the different pieces of the transportation system that they’re
using; they just want to get there without a hassle.
It seems to me that those of us who are on the operating and the providing
side have got to start figuring out what trips mean from the customer’s
standpoint. There are many different pieces to that. In the transit business,
we don’t think enough about our customers. One of my professors at the
University of Delaware showed pictures of some bus stops. I’d be
embarrassed to ask anybody to get on my service if the bus stops were the
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Appendix II
Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
front door to my service—the bus stops were pathetic, especially because
the alternative was walking 20 feet and getting in your car. You might sit in
traffic, but you’d be by yourself, you would have whatever radio station
you wanted on, you could smoke a cigarette and nobody would scream at
you or whatever it is you wanted to do. It’s a whole different travel
experience, and you probably don’t have to go outside. When you ask
somebody to change their travel experience, they must go outside, wait, sit
with people they don’t know, and go through an experience that’s totally
different. So thinking about the whole trip and the complications that our
institutional structures pose make this a challenge for us.
We need to find ways to think about the user’s travel experience. Is
Delaware’s the right way? I don’t know. We’re small and probably not the
best example because you couldn’t pull off our institutional structure in
most other states, and it might not even make sense. But, we may be
showing a way—without destroying our institutional structures—to bring
together partnerships in new business ventures. We’ve joined
Pennsylvania on a submission to the Federal Transit Administration on
some new fare media. We’ve contracted with the Southeast Pennsylvania
Transit Authority to operate commuter service along the Northeast (rail)
Corridor. This means that travelers can park their car, get on the train or
transit service, and pay using the same medium, making it easier for them.
There are all kinds of arrangements that will break down the jurisdictional
issues and lead us to some new places.
Metropolitan Planning Organizations also will be a place that will see some
transformation. Although I don’t think we’re ever going to get anybody to
give up their land-use authority, these organizations are the table around
which these issues can be brought together. In most cases, land-use
agencies are members of these organizations; if not, they should be.
Transportation providers are also there. The people who provide other
elements of infrastructure—water and sewer—are missing. Schools are
another critical piece, but they don’t tend to participate. The challenge is
to bring together all the infrastructure decisionmakers and identify
vehicles for doing that. It’s insane to be putting the transportation
investment in one place and the water and sewer investments some place
else because you’re going to repeat both investments in the other location.
And that still happens. It’s a challenge that we have to address.
Changing State Roles In the transportation business, we are asset managers. Although we don’t
always know it, I think we’re getting much wiser to that. State after state is
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Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
coming forward with a “preserve it first, fix it first” approach. We are
recognizing that role, but it is clearly a balancing act because you’re never
going to have preservation at the exclusion of expansion. In Delaware, we
are moving aggressively to restore and repair the assets that we use every
day. About 5 years ago, a beam on I-95 cracked, and we had to take two
lanes out of service for a short period of time. It was chaos—a nice
warning. It gave us an opening to say that this is important—you
absolutely have to take care of what you’ve already built.
Coupled with that is figuring out ways to utilize what we already have as
efficiently and effectively as possible—hence, the ITS initiative that all
states are involved in. In our statewide initiative, we just finished putting a
new traffic signal system in our university town of Newark. One state
legislator commented to me that the traffic works better today than it did
20 years ago. That could mean that our signal systems have been so lousy
in timing for the last 20 years that we’re making up for inadequacies of our
own operation. Although there are some real benefits, we are just buying
time—this is not going to fix the problem. But there are opportunities to
make the traffic flow better and to give our customers better information.
Kiosks and websites will allow you to pull up a map in your car; with the
Global Positioning System, you’ll know exactly where you are and you’ll
have someone telling you how to get there. That’s going to be a nice thing
to look forward to, and it will allow us to make better use of our whole
system.
In Delaware, we are attempting to help our citizens understand their
transportation choices. It’s a long, involved process, but in a democracy it
is the people who benefit by their own choices. By taking time up-front to
help people understand, we’re going to come up with projects that we can
build and that help with some of our livability issues.
Let me touch on a couple of other issues. Environmental issues clearly are
part of the transportation lexicon these days, and we need to deal with
them. The Transportation Equity Act for the 21st Century (TEA-21) is giving
us the incentives to do that, by streamlining. TEA-21 is not to get us away
from addressing our environmental responsibilities—quite the opposite. It
is finding better ways to do that.
Also, the lack of pricing mechanisms is somewhat unreal, both on the
transit and the automobile sides. It is similar to health insurance: we have
no idea how much it costs because the price is so well hidden. Tolls,
which are an anathema, are one way to help people understand a little bit.
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Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
Other ideas don’t seem to get off the ground—for example, paying for
insurance at the pump. Finding ways to directly associate the cost of trips,
whatever the trip may be, is very important as we move ahead. Tolls are
not a very popular idea in Delaware, so we need some help to convince
people that tolls are something that we should try. We’re very good in the
transportation business at rolling out problems. When you get into
term-limited governorships, you begin to think—I’ve got 2 years, let
whoever comes next worry about it. So you cobble together ways to avoid
reality because people don’t like to raise taxes.
It’s very hard to get the total cost of transportation and other
infrastructure issues together in one place. This is an area where we could
use some help in understanding costs and helping our customers
understand what we’re doing to ourselves. One of the tools that we clearly
need is technology and research—that’s a critical federal role. It is
absolutely critical for us to continue technology and research in terms of
materials, systems, and the kind of analytic work that helps frame
problems for those of us in the states.
Training is another area that needs attention—we absolutely have got to
teach our people differently about the transportation system. I gave a
presentation at the Transportation Research Board on pedestrianization. If
we’re ever going to have legitimate consideration of pedestrianization, the
design standards have to be integrated into books that our people use so
that it becomes second nature. It’s not an amenity; it’s part of what we do.
Right now it’s a separate chapter, but it’s got to be an integrated book. As
we improve a road, it’s not just for automobiles. I’ve got kids walking up
and down the side of roads with no sidewalks—that’s a crime, and it
shouldn’t be that way. We need to be taught how to integrate pedestrian
considerations.
There are institutional challenges to integrating the modes and enhance
the roles of regional bodies—possibly, restructuring the trust funds that
support the transportation investment. We now have modal trust funds,
and in many, many states we have constitutional limitations on their use.
Delaware is not one of those, we’re very flexible, which is very good. Our
future revenue sources are going to be severely threatened if current
automobile research is successful at getting 60 miles to the gallon—and
there is no reason to think that the research won’t be successful. That’s
something for us to think about.
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Presentation by Anne P. Canby, Secretary,
Delaware Department of Transportation
So, I think that there is very much a federal role. I also think the states are
in many ways in the catbird seat and beginning to recognize the
opportunities that we have and the need to make some changes. Clearly,
there are going to be changes at all government levels, and the private
sector also is going to change—fairly dramatically. So, there certainly is a
lot out there. I hope I’ve given you at least a few thoughts and that we can
get into a good discussion. Thank you.
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
“The most important thing to understand about traffic congestion is that it is a problem that
cannot be solved. There is no remedy for traffic congestion.”
My assignment was to orate on the future of ground transportation over
the next few decades. I’m going to use the technique I call proof by
assertion. I will describe my 10 conclusions.
Population Will Continue The first point is that a crucial consideration for the future of ground
to Grow transportation is the expected growth of the United States population over
the next 20 years. From 1995 until 2020, the Census Bureau estimates that
the population of the United States will go up by 60 million people—about
12 million every 5 years. Somehow, U.S. ground transportation systems
must expand their capacity to cope with this large increase in persons,
households, and goods. If we examine the ratio of increase in the number
of automotive vehicles—cars, trucks, and buses—to the population from
1980 to 1995, there was a 1.29-increase in vehicles for every 1 human being
added to the population. That ratio was a little lower from 1990 to 1995
than it was from 1980 to 1990. So somewhere between 60 and 77 million
more automotive vehicles will be added to our roads by 2020. That is a rise
of 30 to 38 percent over the number that was here in 1995. These data are
based on car registrations, and registrations slightly exaggerate the
number of actual vehicles, but not by all that much.
Thus, the sentiments of many existing residents who want to limit future
growth in order to reduce congestion are total delusions. There is no way
to limit growth at the regional level because no region can stop
immigration from somewhere else. True, growth at the local community
level can be limited by simply pushing it into two other places—peripheral
sprawl and in-city overcrowded slums for low-income households, as in
much of southern California.
Automobiles Will Remain My second point is that privately owned automotive vehicles will remain
Dominant the dominant form of ground transportation for the foreseeable future in
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
the United States. Attempts to cope with rising traffic congestion by
shifting more people to public transit are not going to work. The
automobile is, and will remain, a better form of movement for most people
in spite of congestion. It’s faster, safer, more comfortable, more flexible in
timing and in linking scattered origins and destinations, and often cheaper,
especially if you get free parking. It will not be possible to lure any
significant portion of auto-driving persons into using public transit by
improving the quality, quantity, or service frequency of public transit. One
reason is that such a low percentage of all trips is now taken by public
transit—only 3.5 percent of work trips in 1995 compared with 90.7 percent
for private vehicles. Therefore, even if we could triple the percentage of
total commuters using public transit—which is extremely unlikely—that
would reduce the percentage of commuting by automotive vehicles by
only 11.6 percent. That reduction would be offset by the increase in
population, which is going to be much larger than 11.6 percent.
The only way to substantially increase the percentage of trips made on
public transit would be to make the use of automotive vehicles far less
convenient or far more costly—such as by quadrupling the cost of gasoline
or placing heavy taxes on automobiles, as in such countries as Denmark
and Singapore. But these steps will be so strongly opposed by a majority
of Americans that there is absolutely zero chance that they will happen.
Apologists for public transit say transit is necessary to cope with all this,
and we need more subsidies for transit, because the automobile is so
heavily subsidized. They should look at one number that I think is very
impressive. Transit now gets 25 percent of the public spending on
transportation in the United States at all levels and provides between 1
and 2 percent of the trips. That’s a fairly impressive subsidy.
Commutes Are Not Traffic congestion is widely perceived as a worsening problem across the
Worsening nation, especially in fast-growth suburban areas. But the perception is
worse than the reality. I do think congestion is getting worse in many parts
of the country, particularly in very large metropolitan areas. But the
average length of time spent commuting each day has not increased very
much over the past 12 years, except in a few very large metropolitan areas.
The average commuting time across the country was 18.2 minutes in 1983,
19.7 minutes in 1990, and 20.7 minutes in 1995. That’s an increase on the
average of only 2.5 minutes, or 13.7 percent in 12 years. The average
distance traveled rose a little more, from 8.5 miles in 1983 to 10.6 miles in
1990 and 11.6 miles in 1995. That means that commuters are actually
traveling faster than they were before, although it takes them a little longer
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
to get where they’re going. But in most parts of the country where
residents think they have very bad traffic congestion, they really don’t. It
may have gotten worse, but it’s really not all that bad.
Congestion Cannot Be The most important thing to understand about traffic congestion is that it
Eliminated is a problem that cannot be solved. There is no remedy for traffic
congestion because traffic congestion is essentially a balancing
mechanism that enables people to pursue six objectives other than
minimizing their commuting time. Two of these objectives are held by
employers and the other four by households.
The first objective that employers seek is having most firms use similar
work periods during the day. Then when you call up somebody at another
firm, that other person is at work. Therefore, almost everybody has to go
to work and come home from work at about the same time. There are
some staggered working hours, but they don’t really have much effect,
because they aren’t staggered all that much. Second, the owners of
businesses want to operate mainly in low-density work places, which
means they are widely scattered across each metropolitan area. Those are
the key objectives that employers want.
The first objective that households want is to have a wide range of choices
of where to work and where to live in different types of communities,
especially if they have more than one earner in the household. Second,
they want to be able to combine several different purposes on each
individual trip to be efficient. Third, they want to live in a relatively
low-density community. And fourth, most households want to separate
their own family dwellings spatially, and, particularly, regarding public
schools, from other families with much lower incomes and social status
and often from people who are in different racial groups.
It is not possible to pursue all these objectives effectively without
generating a lot of traffic congestion. In reality, traffic congestion is the
balancing force in rationing road space that emerges from pursuit of those
objectives. Yet most Americans do not want to give up any of these
objectives enough to change their behavior. They would rather endure a
certain amount of traffic congestion than change these objectives. It’s true
that the more traffic congestion they encounter, the unhappier they are.
So, the amount of traffic congestion they are encountering is bad enough
to make them complain, but not bad enough to make them change their
behavior. If congestion becomes unacceptable, they can move closer to
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
where they work or work closer to where they live, which many of them in
fact do. But this means there is no such thing as a solution to the traffic
congestion problem. Traffic congestion is not a disease that can be cured.
It is an inherent connection in the quality of life that embodies those
objectives that I described.
Letting Existing Roads In the recent past, peripheral low-density growth in most metropolitan
Deteriorate Is Not areas has been accommodated by financing enough new streets and roads
Sustainable to cause only moderate increases in traffic congestion at the periphery.
However, the maintenance of previously existing streets and roads has not
been kept up adequately. This arrangement is not sustainable because too
many older streets and roads will deteriorate into very bad condition. It is
a fact of life that many of us getting on in years do not want to recognize,
but older things do deteriorate as time goes on.
Thus, we are allowing our existing infrastructure to deteriorate in order to
add more on the periphery to accommodate new growth. This means we
can’t accommodate projected future peripheral growth without either
• underinvesting in maintaining existing systems to a dangerous degree,
• failing to service the new growth adequately with new streets and roads,
• increasing the densities of the new growth so we don’t have to build so
many roads to service, or
• hugely increasing the share of national production we devote to building
and maintaining streets and roads and other transportation.
The first two alternatives are at least theoretically unacceptable. However,
in fact, places like Florida are engaging in both of those as a means of
accommodating their rapid growth. Hugely increasing the allocation of
resources to streets and roads seems unlikely in light of competing budget
pressures and the present diversion of so many public resources to transit,
even though it provides a very low percentage of all trips and travel miles.
So this leaves increasing density in new growth areas as a theoretical way
to accommodate future transportation needs.
Forms of Ground But changing the land-use patterns embodied in future metropolitan
Transportation Will Not growth and development will not substantially alter the basic forms of
Change ground transportation now in use. After all, 85 percent of the developed
portions of the country that will exist in 2020 already exist now. Even if
radical changes in the form of the to-be-added 15 percent could be
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
achieved, which I don’t think is the case, that would not substantially
change the patterns already in place today. They will necessarily dominate
the overall picture of transportation in 2020.
Increasing New-Growth Raising average densities in new growth areas and emphasizing in-fill
Densities May Help development to a maximum degree might somewhat reduce the cost of
Address Future accommodating future population growth with adequate infrastructures.
New growth suburban densities might have to rise from about 2,500
Infrastructure Needs persons per square mile, which is the density of the city of Phoenix, to
about 7,500 persons per square mile, which is the density of the city of Los
Angeles, to make any difference. But this will not reduce traffic congestion
much, because higher densities generate more local congestion, since
almost as many vehicles are concentrated in a smaller space.
Local Governments Not Even if it were desirable to use higher-density land use for new growth,
Equipped to Handle Higher existing governance arrangements in most metropolitan areas are not
Densities capable of managing regional growth to achieve any rational policy of any
kind whatsoever, particularly higher densities in new growth areas. In fact,
existing governance structures tend to lower densities in those areas to
protect the environments of affluent households who live there. This is
explained and discussed at length in one of my books called New Visions
for Metropolitan America,1 which was published by Brookings in 1994.
It is not politically likely that we can develop some type of regional
planning and authority over land use and transportation over local
governments. Doing so, however, is the only way to achieve consistently
higher densities in new growth areas, something like what Portland,
Oregon—and almost no place else—has done. Most states will not do this
because large majorities of citizens refuse to reduce the authority of local
governments or to accept even moderate-density multifamily housing
nearby in any significant quantity.
Congestion Is Here to Stay Traffic congestion is not going to decline in the future. In fact, it will
probably increase as the total population rises and real incomes rise
enough to enable more people to afford private vehicles. This is not a
problem confined to the United States. In fact, traffic congestion is much
worse in many parts of the world. It is a worldwide phenomenon of rising
1
Anthony Downs, New Visions for Metropolitan America (Washington, D.C.: The Brookings Institution
and Lincoln Institute of Land Policy, 1994).
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Appendix III
Presentation by Anthony Downs,
Senior Fellow, The Brookings Institution
real income and the desire to use private transportation. There is no such
thing as a solution to the traffic congestion problem because it’s not really
a problem. It is the result of our pursuit of other objectives, which we do
not want to give up. True, some improvements can be made, but they will
only be marginal. They will likely be swamped by rising metropolitan
populations and the use of multiple vehicles by more households.
As I say in the final paragraph of my book, Stuck in Traffic,2 congestion is
here to stay. So you’d better learn to like it. Get yourself an air-conditioned
car with a stereo radio, a tape deck, a portable computer, a television set, a
microwave and commute with somebody you’re really attracted to. Regard
commuting as part of your leisure time. You might as well learn to enjoy it.
2
Anthony Downs, Stuck in Traffic (Washington, D.C.: The Brookings Institution, 1992).
Page 28 GAO/RCED-99-176 Surface Transportation
Appendix IV
Presentation by James A. Dunn, Jr.,
Professor of Political Science and Public
Administration, Rutgers University/Camden
“Certainly there are true problems associated with the automobile. But for most
Americans, it’s a solution.”
One of the themes in my recent book—Driving Forces: The Automobile, Its
Enemies, and the Politics of Mobility3—is the difference in perception
about the automobile and what it means in our society. What I try to do in
Driving Forces is to explore the great gulf in perceptions and policy
prescriptions between the mass of Americans, for whom the automobile is
the solution to their transportation needs, and a group that is growing in
importance in the transportation policy community that I call the
“antiauto vanguard,” for whom the automobile is a problem—a big
problem. They truly see themselves as a vanguard of people who know
where the masses need to go and see themselves as leading the masses in
the right direction, in spite of the masses’ false consciousness. They are
increasingly organized and self-conscious about their role of saving the
masses from themselves. They have a whole agenda of policy
prescriptions that are not designed to address the problems of the
automobile but to address the problem of the automobile itself. Basically,
they say that we need to somehow get rid of automobility as we
understand it today—not to get rid of all automobiles but to get people out
of their cars, to require drastic reductions in the amount of vehicle miles
traveled that the automobile produces. They want to get people using
more collective means of transportation, rather than individual means of
transportation. Certainly there are true problems associated with the
automobile. But for most Americans, it’s a solution.
In the book, I look in some detail at the kinds of policy proposals that they
have put forth. I conclude that essentially, it’s not going to work; they’re
promising much more than they can deliver. As people like Anne Canby
know, it’s hard to get people out of their cars and onto buses or trains. It’s
hard to get people to form car pools and share rides. And given the kinds
of policy incentives and disincentives that are within the mainstream of
American politics, it’s very, very difficult. And with that kind of parameter,
it’s going to be a great disappointment to the vanguard that they’re not
going to achieve their goals, even though they feel this so urgently.
But then, you say, why even bother looking at their prescriptions in detail
and debunking them because they’re just not going to happen. And here I
have to refer to Anthony Downs and his concept of the “issue-attention
cycle.” There are times when “a window of opportunity” opens up in a
3
James A. Dunn, Jr., Driving Forces: The Automobile, Its Enemies, and the Politics of Mobility
(Washington, D.C.: The Brookings Institution Press, 1998).
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Appendix IV
Presentation by James A. Dunn, Jr.,
Professor of Political Science and Public
Administration, Rutgers University/Camden
particular area. People then start searching and grabbing off the shelf
ideas that have been hanging around for years, and trying them out: “Hey,
we’ve got a problem—all of a sudden, let’s go get some policies, hook
them up to these problems and see if they’ll solve the problems.” You can
look down the road in a few years and see that it’s quite likely that there
will be this kind of a window of opportunity opening up in the
policy-making process toward the automobile and its problems.
What I’m saying is that now is the time to start examining the policy
proposals that are being put forth by the antiauto vanguard. They are
calling for dollar-a-gallon gas tax increases, bans on new highway building,
massive spending on new rail transit systems, and federally mandated ride
sharing. We need to look at them very, very carefully, to make sure we
don’t make some rather expensive and unpopular mistakes when the
issue-attention cycle brings the automobile to the fore again.
Obviously, I have a lot of colleagues and friends who are card-carrying
vanguard types, and I’m not very popular with them right now. But for 30
years they have been criticizing the establishment—criticizing the
automobile. And turnabout is fair play. If they have an agenda, then they
have to be ready to take some criticism in return. They’ll say then, “well,
you’re just defending the automobile and the status quo.” No, nobody in
academia certainly gets very far by just saying “keep the status quo.”
The Paradigm of the I have my own paradigm, which I call the “automobile plus.” My
Automobile Plus: It’s suggestion is you start with the automobile and you go on from there. You
Better to Experiment Than don’t try and attack the automobile head on. You don’t try to get people
out of their cars when they don’t want to get out of their cars. You look at
Mandate reality and you improve around the edges with incrementalism. I don’t
really object to a lot of innovative ideas and new thinking, as long as they
are carefully vetted.
So it’s the automobile plus: well thought-out initiatives in urban transit or
inter-city passenger rail, democratically chosen “new
urbanist”community designs, and car pools that people want—not ones
that are imposed by outside regulations, particularly federal regulations.
The role for the federal government should be in the nature of promoting
experiments and letting States and local communities see what works.
Federal support for limited local experiments should also have a built-in
evaluation component so we can see whether an experiment is working
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Appendix IV
Presentation by James A. Dunn, Jr.,
Professor of Political Science and Public
Administration, Rutgers University/Camden
and if so, why, and if not, why not. Then the federal government can
disseminate this information. I suggest that it’s better to experiment than
to mandate—to experiment with well-thought-out, well-designed local-ride
sharing programs, rather than to mandate nationwide programs that are
bound to be unpopular and probably unsuccessful.
Now Is the Time to But the biggest part of “automobile plus” is not so much with people’s
Consider Potential individual behavior but rather with the technology of the automobile itself.
Solutions to the Problems Part of the problem with the automobile is pollution and energy
consumption—energy dependence. Rather than trying to come up with
various kinds of complex and controversial programs to get people out of
their cars, let’s make the cars better. Americans are pretty good at solving
technology problems. Let’s move toward what I call the “post-petroleum
propulsion system” for automobiles. We’re not going to do that overnight.
We’re not going to be able to do that without some controversy. But it’s
time now to start thinking about deploying incentives and perhaps,
mandates—not against the citizen voter but aimed at the auto
manufacturers who are producing a product that the citizen voter is, I
think, going to continue to demand far into the foreseeable future, unless a
better product comes along. We need not necessarily expect the return of
Ralph Nader in all his adversarial glory. I think both Washington and
Detroit have learned that adversarial confrontation is not necessarily the
way to go. We need to be thinking about new and innovative ways of
moving toward new automobile propulsion systems, so we get cleaner,
more fuel-efficient automobiles, not trying to get people out of their
automobiles.
Anne Canby mentioned vicious cycles in automobile dependence. If in fact
we move toward a 60-mile-per-gallon car or even toward a zero emission
vehicle that’s not based on propulsion technology with petroleum fuel, we
may create a kind of a “virtuous cycle.” That is to say, as cars need to
burn less and less petroleum, it would be possible to increase the rate of
taxation on petroleum. People would be paying roughly the same amount
of taxes because they’d be burning less petroleum. As that creates
incentives for auto manufacturers to have even more fuel-efficient vehicles
or vehicles for which the fuel is not petroleum, that then creates
opportunities for new financing mechanisms for roads and streets that are
based perhaps on electronic-toll-collection technology. This puts a tool in
the hands of traffic and transportation planners, who then can begin to
address some of the peak-hour congestion problems. It’s a virtuous cycle,
not a vicious cycle.
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Appendix IV
Presentation by James A. Dunn, Jr.,
Professor of Political Science and Public
Administration, Rutgers University/Camden
To conclude, the way to the future is exploring innovations that build on
the automobile—that make the automobile better for the environment but
also better for the individual because the individual is not going to want to
give up the automobile. I suggest that the vanguard types who want to roll
back automobility haven’t thought through the consequences for the
democracy and personal empowerment of their extreme antiauto stance.
Page 32 GAO/RCED-99-176 Surface Transportation
Appendix V
Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
“The tax-funded public monopoly was appropriate for the mid-20th century mission of
building basic infrastructure. But providing a variety of non-standard services to a range of
customers who have varying needs is not compatible with tax based funding and
bureaucratic decision-making. Highway finance must evolve in new directions based on
more direct customer input, an increased role for private enterprise in service provision,
and the addition of markets and prices, technology and capital.”
“Certain important segments of the highway-using community appear ready to pay more
for better service; for example, just in time freight shipments, time-short commuters, and
business travelers may be prepared to spend more for “guaranteed speed limit” trips.... But,
for the most part, premium service can’t be purchased anywhere at any price. And that is a
curious phenomenon in a free enterprise economy.”
I’m going to discuss moving toward a financial system that supports
improved services by focusing on the financial implications of some
institutional issues that have been raised during the conference. My
particular perspective is the relationship between finance and
transportation service and how the two interact.
A Financing System Linked In a mixed economy like ours, the financial mechanisms supporting
to User Needs infrastructural services for surface transportation have to perform two
functions. One is raising capital—generating funds. But an effective
financing system should do more than simply raise revenues. It should also
incentivize service providers and their customers/users to evolve a
transportation system that meets contemporary needs. My central thesis is
that the existing system of transportation finance does the former job
quite well but tends to inhibit evolution toward a more performance-based
customer-driven, service-oriented approach to transportation
infrastructural services.
The Changing Mission of The basic mission of highway owners (states and local governments) is
Surface Transportation changing. We have a largely mature network and significant constraints to
Institutions significant additions (funding, environmental and community
considerations, etc.). At the same time, we are faced with increasing
congestion and customer demand for improved service levels. As a result,
today’s surface transportation mission increasingly is to provide the best
possible service through the most efficient use of the available capacity.
Exploiting the existing infrastructure more effectively requires actively
managing the facilities and networks in response to demand variations so
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
that service levels are maintained and travelers are supplied with
maximum information to make travel decisions with full knowledge of the
transportation systems’ conditions. Such an aggressive approach to
management and operations has been conceived within the transportation
profession around both new technology and new institutional concepts. ITS
represents a systematic approach to managing transportation facilities and
services in real time both for maximum efficiency and to provide services
appropriate to congested systems. To improve reliability and offer
knowledge of existing conditions, ITS builds on the applications of
advanced technology in sensing, communications, computation, controls,
and information dissemination. First-generation communication and
control systems are new being deployed for advanced traffic operations,
and a range of new information dissemination approaches is being
developed to provide travelers with a new level of information about
conditions and options. Capitalizing on the promise of these systems will
require not only new concepts and technology but also additional capital
and new operating arrangements.
At the same time, new institutional concepts are emerging that capitalize
more directly on the private sector to access technology, capital, and
innovation. New public-private partnership arrangements include those
that can provide capital for private toll roads; introduce new technology,
such as improved construction material and techniques, and new services,
such as the premium toll roads; and advanced traveler information.
These new technical and institutional approaches share in common that
they are service-oriented, performance based, and focused on real time,
active exploitation of the existing infrastructure. In addition, they address
the needs of special market segments and introduce service and
technology innovations. Fundamentally, they are driven by an increased
focus on performance and markets.
The Current System and Its The existing financial framework was designed for an earlier era of basic
Constraints infrastructure construction. Monopoly ownership and legislatively
determined tax-based funding with bureaucratic decision-making are not
well suited to capitalize on private enterprise nor tuned to expressions of
customer demand. I’m not going to describe the key characteristics of our
current financing system—they are well known to this audience. I would
point out that with a substantial preservation backlog burden, the sector is
chronically underfunded and is ill equipped to embark on the development
of a new generation of transportation system improvements. You may not
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
be aware that, as a nation, we spend less than 3 cents per vehicle mile on
infrastructure—out of an average of 40 cents for full operating cost (less
than the operating cost of car air-conditioning). With these institutional
and financial constraints, there is very little focus on what a first-class
road operation might actually require.
The Challenge of Evolving The emerging context for transportation and the need for a greater focus
the Financing System on management, operations, and the installation of new technology
suggest a need for evolution to a new financial mix. There are two
principal challenges. First, there is the 20th-century legacy financial
agenda, namely making the existing financing system more efficient than it
is today and sustaining the revenues that are part of that system. There’s
also another agenda, which I think of as the 21st-century challenge:
evolving new mechanisms that contribute to the effectiveness of the
transportation service itself.
The first challenge tends to dominate discussions of innovation in
transportation finance. I’m going to conveniently ignore a lot of very
thorny issues, including the revenue erosion due to inflation and vehicle
efficiency as well as tax evasion and diversion. Nor will I discuss several
exciting innovations to maximize the leverage of the existing revenue
stream, such as commingling private investment, innovative finance,
public-private partnerships, et cetera. I’m going to concentrate on the
second challenge—effectiveness. This is based on the thesis that a
competitive high-tech service economy has different needs from its
transportation infrastructure from those for which the inherited financial
arrangements were intended—and that this inheritance must be modified
if it is to support significant improvements to transportation service in a
new era.
Needed modifications to the existing financial/institutional arrangements
would include approaches that would generate new revenue sources, new
project and service sponsors, and new mechanisms that will encourage
more customer-specific and customer-responsive service innovation.
Three examples illustrate some of the relationships between customers,
services, costs, prices, and revenues that need to be addressed.
Congestion continues to grow, which, in most sectors, is a clear signal that
service improvements are needed. Yet, the necessary capital facility
preservation preoccupation of our state departments of transportation,
together with inherited conventions and the lack of customers’ voice,
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
limits incentives to shift to very intensive congestion management and
enhanced operations orientation for state and local transportation
agencies. There is simply not enough money, not enough resources, and
not enough attention to have this entire agenda under the current system.
The increasing prevalence of incidents, breakdowns, and crashes now
cause about 50 percent of the delay we experience in metropolitan areas.
There is no way for the inconvenienced traveler “market” to express its
demand (through willingness to pay) that priority be given to the kind of
investment in operations in technology and systems that can more
effectively minimize that kind of a problem.
Certain important segments of the highway-using community appear ready
to pay more for better service; for example, just-in-time freight shipments,
time-short commuters and business travelers may be prepared to spend
more for “guaranteed speed limit” trips. This seems to be the lesson
learned in the so-called High Occupancy Toll lanes in California where
users are paying up to 40 cents a mile to bypass peak period congestion.
Reliability is as important as time savings in the kind of economy that we
have today. But for the most part, premium service can’t be purchased
anywhere at any price. And that is a curious phenomenon in a free
enterprise economy.
What Changes Are We are at a point in the evolution of our surface transportation systems
Needed? where we need to shift from a financial system that is oriented to
construction to one that fosters effective, customer-responsive, innovative
service. This must include financial arrangements/mechanisms that will
detect, support, and promote customer-related service improvements. This
is not a new issue for a private enterprise economy. Other networked
infrastructure sectors (power, telecommunication, and water) exhibit
dramatic changes in organization and financing that are fostering
substantial improvements in service quality. These sectors are increasingly
deregulated, competitive, and investor owned. They have private-sector
style management that focuses on customer service (as well as
constructing and maintaining physical plant) and offering priced services
with premium options. Dramatic changes in organization and finance have
brought with them substantial improvements in service quality.
The United States is the international model on institutional/financial
structure for progressive public infrastructural services. Yet, the transport
sector remains uniquely on the static fringe of the spectrum with regard to
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
the provision of public infrastructural services. Perhaps the 21st -century
agenda for surface transportation finance needs to focus on introducing
elements of the financial mechanisms that characterize the norm in other
networked services. The same types of transition may be necessary
• from a revenue-constrained priority on the preservation of basic
infrastructure to increased resources focused on real-time service,
• from public monopoly ownership and operations to an increased role of
the private sector through outsourcing public-private partnerships
franchises,
• from “one size fits all” services and facilities to market-related
price-based premium and discount options,
• from arms-length relationships with customers/users to market-related
relationship through prices,
• from tax dependency to a new mix—with commercialized self-supporting
service components, and
• from public agency bureaucracy to an enterprise-style management of
transportation agencies with performance incentives.
It is obvious that major institutional changes would be involved: political,
professional, and even cultural. Therefore, any change must be
evolutionary and politically practical: a transitional approach
incrementally adding enterprise features where and as appropriate, and
retaining existing systems appropriate to the components of networks.
Changes Taking Place Some of these changes are already visible. The American Association of
Today State Highway and Transportation Officials recently completed a survey of
the 50 state departments of transportation, called “The Changing State
DOT.” This report describes a wide range of innovations that are going on
in many state departments. Some of the innovations are financial—such as
increased reliance on nonfederal funds, leveraging and commingling State
Infrastructure Banks, increased tolling, private finance, and so on. There is
also some experimentation with new services for different markets. I’m
sure you all know about providing single-occupant vehicles the
opportunity to pay a premium for the space left over in high-occupancy
vehicle facilities. There are a few experiments with pricing, and a few state
departments are beginning to think in an asset-management
perspective—focusing not only on the capital assets but also on operating
the assets they have to maximum customer-related effectiveness. And
there are a variety of experiments with new institutional
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
relationships—vertically and horizontally—between the public and private
sector and among levels of government.
But these changes are not widely known or discussed. There’s very little
dialogue among states and local governments on these issues. At the
national level, the discussion of these issues is virtually invisible–no think
tank white papers of professional conferences. The consciousness level is
low and inertia–as we have remarked in several contexts today–is high.
Yet, there is an opportunity to begin to connect some of these innovations
that are going on to give them visibility and to give the pioneers and
champions some cover, some support, and some incentives. The changes
taking place need to be focused and consolidated with debate and
encouragement.
These developments suggest some elements in a tentative agenda that
links institutional to finance and supports progress in service terms. Some
of these elements include the following:
• Continued programmatic devolution to state and local levels (some
suggest partial tax devolution as well).
• An increased focus on system performance in customers’
terms—including support for real-time active systems operations.
• Additional incentives to state and local governments to form public-private
partnerships in the development of technology and the delivery of service.
• Shifting to direct charges to finance service upgrades (tolling interstate
highways).
• Incentives for increased commercialization of premium and special
services and enterprise-style approaches.
• Credit support for private investment (including securitization of debt).
Bring the Future Forward As the role of highway finance moves beyond simply constructing and
Faster preserving capital facilities, key financial arrangement issues move beyond
“how much” the legislatures–federal and state—will grant. The
tax-funded public monopoly was appropriate for the mid-20th century
mission of building the basic infrastructure. But providing a variety of
nonstandard services to a range of customers who have varying needs is
not compatible with tax-based funding and bureaucratic decision-making.
Highway finance must evolve in new directions on the basis of more direct
customer input, more private enterprise in service provision, and adding
markets and prices, technology, and capital. Other infrastructure sectors
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Presentation by Stephen C. Lockwood, Vice
President, Parsons Brinckerhoff
have evolved ways that incorporate such free enterprise arrangements. We
must find a parallel path suitable to surface transportation.
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
“Transportation policy centers on four challenging issues—mobility, environment and
community enhancement, and benefiting the economy.”
“Although we’ve made some historic decisions about what’s a public responsibility and
what is a private responsibility, those lines are not fixed; they move. One of the great
underlying debates of U.S. economic and political history has been the question of what is a
federal responsibility, what is a state responsibility, and what is a local responsibility.... We
need to remember that the policies have changed dramatically over the years at varying
points in time.”
The purpose of this conference is to think broadly about new directions in
transportation policy for the 21st century. I’d like to begin this
conference by providing a framework for the conversations and
discussions that will follow. Whenever we think about transportation
policy, we should think about the following three questions:
• What are the problems we’re trying to solve?
• What norms govern the choices that we can make?
• Which solutions are political decisionmakers, particularly elected officials,
most likely to support?
What Are the
Transportation Problems
We’re Trying to Solve?
Meeting the Challenge of Transportation policy centers on three challenging issues—mobility,
Mobility environment and community enhancement, and benefiting the economy.
In thinking about these issues, we should remember three trends.
• As Tim Lomax and his colleagues have shown,4 there is growing
congestion in urban areas and an astonishing rate of congestion growth in
smaller areas. The congestion is getting worse in big cities, such as Los
Angeles and New York, but it’s also getting worse in small cities, such as
Buffalo and Las Vegas. Congestion also is getting much worse in suburban
areas as they become major commercial centers.
4
Tim Lomax and David Schrank, Urban Roadway Congestion Annual Report—1998 (College Station,
Tex.: Texas Transportation Institute, The Texas A&M University System, 1998).
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
• As Alan Pisarski has shown,5 transit’s market share has been declining,
particularly as the nature of those who drive changes and because of the
introduction of women into the workforce in the 1980s, the growth of link
trips, and the increased decentralization of businesses and residences.
• Many key transportation facilities are nearing the end of their useful life,
and we’re faced with the challenge of rebuilding facilities that are already
badly congested. Fixing a central artery for a major city, such as the
Gowanis Expressway in New York City, generally requires closing it for
awhile, but that wreaks complete havoc on the city’s transportation
system.
To meet this challenge of mobility, we should recall that the average
length of commuting times has not changed substantially for decades.
People somehow make adjustments between work and home to
accommodate the time consumed by their commutes. While some people
commute 3 hours a day in order to live in far-off rural areas, the average
commuting time, according to all the surveys, has not changed
dramatically.
It will be very interesting to look at the next census to see if this changes.
If decentralization continues, the length of commutes will probably stay
about the same. However, if travel times use up all the excess capacity
that was built through the 1960s and 1970s, commuting times might get
much longer. If that happens, the political pressure to deal with congestion
will rise significantly.
Enhancing and Preserving the The second major policy issue is environmental and community
Local Community and enhancement and preservation. To what extent can we allow
Environment transportation to disrupt neighborhoods and natural environments? Is it
okay for a highway to go through a local park? Should we think about the
relationship between transportation policy and the reality or threat of
global warming? If we conclude that such disruption is necessary,
decisionmakers need to determine to what extent mitigation (e.g., design
modifications) help make it politically, environmentally, and morally
acceptable. Are there some forms of transportation projects that actually
enhance and protect communities and natural environments instead of
destroying or harming the environment? To what extent should we
encourage them?
5
Alan Pisarski. Commuting In America II : The Second National Report on Commuting Patterns and
Trends. (Lansdowne, Va: Eno Foundation for Transportation, 1996).
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
Benefiting the Economy Decisions on transportation policy need to consider their economic
impacts, which I group into three types according to their different
political dynamics. The first impact is the direct economic benefits that
public works projects provide for the people and the companies that build
them as well as the companies that supply them. Public choice theory
suggests that such groups may, in fact, dominate the transportation
policy-making process. The second is the regional impacts of highways
and transit systems, particularly on real estate values. Urban political
theory suggests that local decision-makers tend to give this issue great
weight. The third is the long-standing debate about transportation’s impact
on the national economy. About 10 years ago, David Aschauer asserted the
thesis that investment in transportation generally benefits the national
economy.6 Many economists—including Edward Gramlich, Henry Aaron,
and, most recently, the Congressional Budget Office—have criticized such
assertions,7 and the conventional wisdom now seems to be that
well-designed projects can have positive economic impacts while the
impacts of general highway on the economy are either mildly positive or
have no discernable impact at all.
What Norms Govern the My second thematic question has three major components. The first is a
Choices That We Can very fundamental political question about whose responsibility it is to
Make? make transportation decisions.
Who Is Responsible? Although we’ve made some historic decisions about what’s a public
responsibility and what is a private responsibility, those lines are not fixed;
they move. One of the great underlying debates of U.S. economic and
political history has been the question of what is a federal responsibility,
what is a state responsibility, and what is a local responsibility. Although
we have a surface transportation system that dates back to some 40
years—in some respect an anomaly in American history—we need to
remember that the policies have changed dramatically over the years at
varying points in time.
6
David Aschauer, “Is Public Expenditure Productive?” Journal of Monetary Economics, Vol. 23
(1989) pp. 177-200.
7
See Henry Aaron, “Discussion of Why Is Infrastructure Important,” in A. Munnell, ed., Is There a
Shortfall in Public Capital Investment? (Boston, Mass.: Federal Reserve Bank of Boston, 1990), pp.
51-63; Edward Gramlich, “Infrastructure Investment: A Review Essay,” Journal of Economic
Literature,Vol. 23, No. 3 (Sept. 1994), pp. 1176-1196; and The Economic Effects of Federal Spending on
Infrastructure and Other Investments, Congressional Budget Office (Washington, D.C.: Government
Printing Office, June 1998).
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
To What Extent Should The second question of political norms is to what extent should policy
Transportation Policy explicitly seek to shape behavior. Is it an explicit goal, for example, to
Explicitly Seek to Shape encourage the use of transit? Is it an explicit goal to discourage the use of
Behavior? the automobile through mechanisms such as pricing? This question about
the use of incentives and disincentives is very important. The underlying
politics change depending on whether you’re merely trying to encourage
somebody to do something or you’re actually making their life miserable if
they do something that you don’t want them to do.
How Do We Balance Societal The question of how to balance societal versus individual needs is the old
Versus Individual Needs? question, “Can we make omelets without breaking eggs?” While
policymakers were able to balance the competing needs of society and
individuals through the 1950s and 1960s, through the 1970s and the 1980s,
this challenge became increasingly difficult. I actually think that this is an
area that may be in flux. I see some interesting trends that say that we may
be interested in making some more omelets, albeit trying to make the egg
whole again.
What Options/Choices Do There are eight general approaches to addressing transportation problems
Policy Makers Have? that policymakers have before them. The first three reflect historical
patterns of action over the last 20 or 30 years. The fourth reflects the
current regime, and the last three are the most interesting or important
alternative courses of action.
Diminishing the Federal Role The first is that we can imagine a world in which the federal role greatly
diminishes. It is important to recall that as late as 1956, the federal share of
transit spending was virtually nothing, and the federal share of highway
spending was only about 12 percent of total spending. At the height of the
interstate movement in the 1960s and 1970s, this percentage peaked in the
high 20s. Then, with the passage of the Intermodal Transportation
Efficiency Act of 1991 (ISTEA), it started to slowly decline around 1991 or
1992. Those percentages are creeping back up as the federal share of
transportation spending increases.
Moreover, total spending on transportation in constant dollars (that is,
dollars adjusted for inflation) has been increasing since the early
1980s—which means that until ISTEA, the bulk of the increase in spending
was at the state and local level. My point here is that you can imagine a
world in which the federal government decided that it should not have a
significant role in surface transportation but highway spending did not fall
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
significantly because highways are critical to local and regional
economies.
A New Federal Role In contrast, imagine if the federal government were to decide to return to
the heyday of the highway policies from around the 1950s and 1960s.
There was a clear delineation of a federal role—there was a policy decision
that we wanted a national system of Interstate highways to link major
urban areas and to alleviate traffic problems in cities (as well as
sometimes also providing money for slum clearance and downtown
revitalization plans). Two features of the Interstate era are particularly
significant. The first is that very little account was taken of the disruption
caused by highways. The second, and perhaps most important, is that the
Interstate system was an entitlement program. If a road was eligible for
Interstate funding, the federal government was going to pay 90 percent of
the cost, regardless of the total cost. At first, the national highway program
had rigidly defined standards about what was and was not eligible.
However, as the program emerged and the political process worked in the
way that the political processes work, the definition of what became
eligible for federal highway expenditures expanded, and expanded, and
expanded. Eventually, projects that happened to have a transportation
component evolved, such as the Central Artery in Boston or the Westway
in New York, which were actually projects about park land and urban
revitalization that happened to have a transportation component.
Entitlement Plus The third general policy area is related to the second. I might call this
“Entitlement Plus.” In the 1970s, the federal government began to give
regions some flexibility in deciding whether or not they wanted to build a
highway or trade some of the funds to improve mass transit. Although the
local government had some choice, the funding mechanism essentially
remained an entitlement program. And that, as you can imagine,
encouraged a certain form of decision-making.
Block Grants That brings me to what the world looks like right now in ISTEA and TEA-21.
Both ISTEA and TEA-21 made an important shift away from categorical grants
toward more state flexibility. Essentially, the national highway program is
turning into a block-grant-funded program. There’s more than a modicum
of formula tweaking, and there’s always some pot of money that generally
is distributed to Members of Congress, usually on the basis of their
position on the authorizing committee and their general influence over
transportation legislation in Congress. What is critical is that the national
highway program has evolved from an entitlement program to a block
grant because we’re giving the states a fixed pot of money and telling them
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Appendix VI
Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
to distribute it among the projects on their list. This approach radically
changes the nature of the transportation planning process because it
forces the states to make important tradeoffs.
Discouraging Automobile Use The fifth policy refers to the varying proposals put forward by what one
might broadly call the environmentalist community. In his important new
book,8 James Dunn calls this the vanguard strategy, and it has two
components. One is a fairly heavy investment in transit and other forms of
nonhighway transportation. The other is significant restrictions on the
investment in new capacity and possibly even disincentives on automobile
use and stringent controls on land use. The policy implies that the car is a
major problem for society and the land use patterns that it engenders—and
we have to stop it. Depending on the year or month, the reason we have to
do that is, global warming, suburban sprawl, wildlife habitat protection
and urban revitalization. This has captured both an investment strategy
and a strategy that says we may need to constrain people’s ability to use
their automobile. This is an important point, which I will come back to in a
moment.
Greater Use of Information The sixth idea concerns the greater use information technology to improve
Technology our nation’s transportation system. Some people believe that various
forms of information technology—from its simplest traveler information
systems to its most imaginative and far-reaching electronic highways—can
expand the system’s effective capacity. There is, however, some
interesting controversy about whether or not expanding capacity will
encourage or discourage sprawl.
Rationalist Strategies Next, there is the rationalist strategy, which is the economists’ continued
fascination with road-pricing schemes and their continued antitransit,
particularly federally subsidized rail transit, position in favor of market
mechanisms. In his new book, Clifford Winston,9 one of the most astute
writers in this field, estimates that a policy of efficient pricing and services
could generate $10 billion in annual net benefits over current practices.
Winston—and his coauthor, Chad Shirley —believe that if transportation’s
inefficiencies are recognized, we could construct a political dynamic that
would address the inefficiencies.
8
James A. Dunn, Jr., Driving Forces: The Automobile, Its Enemies, and the Politics of Mobility
(Washington, D.C. : Brookings Institution Press, 1998).
9
Clifford Winston and Chad Shirley, Alternate Route : Toward Efficient Urban Transportation
(Washington, D.C. : Brookings Institution Press, 1998).
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
Marketization Related to this idea of rationalization is the question of whether or not we
should be looking at more marketization of the transportation system. This
decision turns on the question of whether or not you believe that state
departments of transportation are monopolies—are they capable of
engaging in the market-based schemes and undergoing the innovations
that we expect in markets? This situation is analogous to the deregulation
of most forms of infrastructure in the United States, such as
telecommunication, electricity, aviation, and trucking. I commend the
Pennsylvania Department of Transportation for attempting to become a
more customer-oriented agency and I imagine that Brad Mallory will tell
you some of the things that they are doing. The intellectual critique,
however, is that this scenario is unlikely without some form of
competition.
How Will Policy Options I’ve given you a framework of the major transportation policies and three
Affect the Future? major issues that we’re concerned about—mobility, community and
environmental protection and economic impacts—and discussed the
norms that govern our choices—whether or not we should encourage or
discourage behavior, whether or not we allow disruption, and who we
think ought to be responsible for making the decisions. Now I’d like to
share with you my thoughts on how different policy options might play out
over the next 5 to 10 years.
I don’t think we’ll see a major diminishment of the federal role. Why? As
George Peterson has written about over the years, people generally
support more spending on transportation.10 So for politicians, supporting a
major federal transportation program is something that their constituents
favor. In addition, the groups with a large economic stake in the current
funding structure —primarily road builders and those who build transit
systems, but also governors and officials from state departments of
transportation—are going to lobby assiduously against any effort to reduce
federal highway and mass transit spending. In contrast, no one is lobbying
that hard on the other side, except for a couple of states that may be
particularly upset by current formulas.
Second, I don’t see any return to any entitlement program, such as the
Interstate system. Such programs only emerge with the development of
fundamentally new technology—such as those that Bob Skinner touched
on briefly—even then, generally only after the general policy approach has
10
George Peterson, “Is Public Infrastructure Undersupplied?” in A. Munnell, ed., Is There A Shortfall In
Public Capital Investment? (Boston, Mass.: Federal Reserve Bank of Boston, 1990), pp. 113-130.
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Appendix VI
Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
been tested at the local and regional levels. The Interstate program, for
example, built on state and local experimentation with limited-access
roads. In addition, it took almost 20 years for the idea of a national system
of such roads to move from a general idea to something the federal
government would actively support.
Since we’re not going to diminish the federal role or have an entitlement
program, we are going to have a large program of block grants. With block
grants, the spread between the donor and donee states generally narrows.
With some variations, we’re basically going to see the states get back
roughly what they put into the system. This trend toward narrowing the
spread of grants is going to be interesting for transit policy over the next
10 to 15 years because the bulk of federal transit money historically has
gone to the relatively small number of locales with transit systems that
carry significant numbers of people. In the most recent debates over TEA-21,
the states that had been getting very little in transit funds compared with
the amount they had been paying in gas taxes grumbled about that. Transit
advocates were basically able to rebuff the attacks partly by making
alliances with environmentalists and partly because the Chair of the
Senate Committee that oversees transit came from New York. However, as
we in Massachusetts know all too well, if generous federal funding for a
program relies on having one politician in a particularly powerful position,
that system is probably unsustainable over a long period of time.
In addition, despite GAO’s criticisms, some form of pork barrel politics will
continue. I don’t mean that pejoratively; I mean that descriptively. As long
as there’s going to be a federal program, we should not be shocked or
surprised by this because Members of Congress are supposed to bring
something back to their districts; it’s how they demonstrate their success.
Moreover, as others understand that surface transportation programs have
money, they are going to try and make other endeavors eligible for
transportation money—through programs such as the ISTEA and TEA-21’s
transportation enhancement programs, which are basically ways of
tapping the highway and transit programs to fund things such as bicycle
paths, parks, and historic preservation.
Policy Impacts on Behavior The likelihood of serious constraints on behavior as advocated by the
environmental community seems quite slim. As a country, we generally
don’t respond well to serious constraints. I say this in full awareness of the
most recent suburban antisprawl programs. If you look closely at the most
successful of these efforts they either involve the purchase of open space
or efforts to limit the provision of infrastructure in rural areas. In contrast,
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
recent efforts to constrain behavior, such as using the automobile, are
either on the ropes or have died. For example, the transportation demand
command measures in ISTEA, which would have required some employers
to discourage single-occupant commuting, were repealed. Thus, it seems
likely that transportation programs will continue to support environmental
agendas with such measures as preserving open space and greater
investment in mass transit (even though most of the data suggest that the
new transit lines are accomplishing neither their mobility nor their
air-quality goals) but are not likely to try to constrain driving.
While highway capacity will continue to expand at a modest rate, we’ll
never see a building boom as great as the 1950s and 1960s. In most
growing urban areas, there is some pressure—sometimes coming from
congestion and sometimes coming from land development forces—to do
new construction. People are also trying to develop a strategy for getting
around the reconstruction question. The strategy for doing so has been
less disruptive but more expensive highway construction strategies plus
expensive mitigation.
To date, information technology has been driven much more by its
producers than its consumers. Most significantly, in the wake of the 1990s
Defense cutbacks, many industries were essentially looking to adapt their
products for new customers. Many of them, therefore, became part of the
surface transportation coalition to get access to some of the federal funds.
To date, however, it’s not clear that such efforts have produced noticeable
changes for drivers.
A couple of questions remain on the table. Why are we still investing in
mass transit despite 20 years of data showing that rail transit generally
does not have significant impacts on either mobility or air quality? Locally,
such projects are often driven by land use considerations. Certain property
owners will organize at the local level because they perceive that
proximity to mass transit will increase the value of their holdings.
Producers of transit want funding to build more transit lines. At some
point, however, the rest of the country either says to the few areas that are
getting the bulk of transit money, “That’s enough” or “We want to build
transit lines too.” It looks like it’s the latter.
I’m not sanguine about the future of marketization because I don’t see
who’s pushing it. In contrast, such industries as telecommunication,
electricity, and airlines had active groups of producers and consumers
who said that these markets were so inefficient that they could provide
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
those services at much lower costs. In the early 1980s, alternative forms of
long-distance service began, particularly for businesses. If you recall, in
the airline industry, those great anomalies of places not subject to airline
deregulation because they were in-state flights were beginning to
demonstrate that the system might be flawed.
Nor can I figure out how you get to Cliff Winston’s large-scale
prescriptions for change. However, there are four areas where market
pressures could produce change over the next few years. One is urban
transit, which is notoriously inefficient. In places like New York, some
private-sector and often-illegal minivan programs are providing services at
a profit, and perhaps they are going to slowly undermine the local transit
monopoly. In response, the pressure to redo some of the transit laws,
particularly the labor provisions, might increase. The current urban transit
system seems somehow untenable. I’m not antitransit, but I’m trying to
sort of predict its future, which seems an unsustainable trend.
My second prediction concerns freight movement between ports. The
Jones Act prohibits the passage of freight between U.S. ports unless it’s on
U.S.-flag and U.S.-built vessels. However, the freight industry is changing
with the emergence of mega-ports just outside the United States in the
Bahamas, in Halifax (Nova Scotia), and in Vancouver (British Columbia).
These ports could lead to circumventing the Jones Act by barging cargo to
a variety of feeder ports up and down either the West Coast or the East
Coast.
Why is this a surface transportation issue? The increased use of barges
might affect surface transportation by taking freight off of highways. The
numbers are potentially significant because there are enormous
efficiencies that could be achieved. In its Conrail merger, CSX estimated
that the merger alone would allow it to take about a million trucks off the
East Coast highways each year. There are enormous efficiencies to be
gained here. Again, if the major U.S. ports begin to see a significant
slippage of business because someone has found a notch or a hole in the
system (like the airlines), there will be increased pressure to address the
issue.
The third area where marketization might increase is in private toll roads,
which are often tied to congestion pricing in fast-growing areas.
California’s S.R. 91 and a new road in New Mexico are interesting
examples. As state highway departments have to focus on the core
business of maintaining what they’ve got, they may be attracted to such
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Presentation by Mr. David Luberoff,
Associate Director, Taubman Center for
State and Local Government, Kennedy
School of Government, Harvard University
projects as a way to provide new capacity without having to seek
additional funds. However, while such projects are interesting, they will
make up only a small portion of total highway spending.
The last is some basic maintenance functions, which pass what
Indianapolis Mayor Steve Goldsmith calls the “Yellow Pages test.” If five
entries in the Yellow Pages are doing what some state employees are
doing, you ought to at least put that service out to bid and let the public
employees compete against the private employees. In Indianapolis, public
employees have actually won many of those contracts because they often
know the business better than anyone else does. I can foresee more of
this, particularly if and when budget pressures get too great. In general,
the academic analysis of transportation policy has underestimated the
importance of producers and consumers as compared with water policy or
regulatory policy.
Thus, as you listen to the remarks that follow, think not only about
whether the policies are efficient but also whether they can be crafted so
they are within the norms of American politics. It’s our challenge to craft
policies that somehow meet these twin tests.
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Presentation by Bradley L. Mallory,
Secretary, Pennsylvania Department of
Transportation
“What we do need to do, however, is to radically change the set of relationships that
transportation agencies have with their customers and virtually everyone else.”
“Once you get those sets of relationships right, the financing mechanisms and other
mechanisms will follow.”
I tinker at the margin of a large state transportation department which
some of its detractors would still call a highway department. We had one
great good fortune—that was to go financially and morally bankrupt in the
mid-1970s. I say that’s the best thing that can happen to a public agency
because then you get to start over again. You generate the political will to
set in motion a set of changes and events that can ultimately result in real
positive change. I think I can say with accuracy that many people refer to
our department today in bellwether terms from time to time, almost to the
exclusion of other state transportation departments. I must tell you, I find
that to be inaccurate. I find the general level of play among the state
transportation departments to be quite high. I would commend it to many
of you within the (Washington, D.C.) Beltway as an example, frankly, of
what can be done. It is a little understood secret, to use one of Steve
Lockwood’s terms. I think there are some good reasons for that. One of
the main reasons is that most state transportation departments have lived
with a checkbook just like you have, and just like most businesses do.
Most people in government don’t live with a checkbook. They have a
budget, but it’s not really theirs. If they save a dollar, the state budget
secretary or the legislature takes it back and spends it on something they
wanted to spend it on. Because of the existence of trust funds and
historical practice, state departments of transportation traditionally, if
they saved a dollar, got to put it somewhere else. So typically, I find them
to be relatively responsive in governmental terms to what the customer is
talking about because they’ve got a checkbook. I think this is little
understood—very little understood, in most quarters. But I think it’s vitally
important.
Finance Is Not the Answer When I first saw that I was going to be on this panel, I sort of recoiled and
I said, “Oh, my God, they put me on the wrong panel. I should have been
on the relationship panel.” Finance isn’t the issue. Then it dawned on me
that I am on the right panel because I ought to stand up and say that.
Finance is not the issue, in my judgment. That’s easy to say right now. Two
years ago, we got a $400 million state revenue increase. Reflect on that for
a moment. Our Governor raised the state gasoline tax 3.5 cents and
increased our state registration fees by 50 percent. Two years later, he got
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Secretary, Pennsylvania Department of
Transportation
56 percent of the vote. His opponent didn’t even show. The political
consequences of investment in infrastructure are almost always positive,
not negative. It’s relatively easy for me to sit here with an additional
$400 million of state revenue in one pocket and thanks, to Chairman
Shuster and Mr. Oberstar, $400 million a year in additional federal revenue
in the other pocket and talk about finance not being the issue. I concede
that point. However, I believe that even when the eventual downturn
comes, finance will still not be the issue. The reason I believe that is
because our real problems are not capable of being solved by vast
infusions of additional capital. We’ve heard a great deal about them today.
We have talked a great deal about traffic congestion. I would offer an
observation to you and that is that it is perfectly acceptable and polite to
talk about traffic congestion on an elevator. What things can you talk
about on the elevator? The weather and traffic congestion. They are the
only two safe subjects. Why? Because no one is responsible for them. You
stand little chance of offending anyone. People widely perceive traffic
congestion essentially to be an act of God and somewhat inevitable. I think
that Mr. Downs’ comments were right on the money. It is essentially the
price of not walking. It is largely inevitable, and I know of no one who has
proposed anything remotely approaching much of a solution to it. I’m
tinkering at the margins of it, as many are. ITSs offer some relief. They
principally offer the relief of giving the person sitting there enough
knowledge so that they won’t be furious. That’s the principal benefit. That
is a significant benefit. There is the potential, of course, to provide people
with alternative information or give them the information necessary to
choose an alternative. But that is no small benefit. And, yes, we can
increase throughput.
I think we all accept the notion that we cannot build ourselves out of
traffic congestion. The reason we cannot build ourselves out of congestion
is not due to money—not at all due to money. It’s due to the social and
environmental constraints. There is no place to put those roads, for the
most part. People would not put up with what we would have to do if we
tried to build those roads. We would not build the Interstate system today.
I think we all know that. We will not build our way out of congestion. So
we do not need a great deal of money to do that.
Improving Relationships Is What we do need to do, however, is to radically change the set of
the Answer relationships that transportation agencies have with their customers and
virtually everyone else. Much is said about the differences between the
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Presentation by Bradley L. Mallory,
Secretary, Pennsylvania Department of
Transportation
public and private sectors. I think most of it is overstated. I’ve been in
both. The truth of the matter is, the public sector is actually quite a bit
better at some things than the private sector is; of course, the opposite
being true as well. They’re each good at different things. One of the things,
however, that the private sector is exceedingly good at is managing the set
of relationships—all the relationships—between supplier, customers, and
contractors. They set up these seamless webs, if you will, of customer,
organization, contractor, suppliers. They’re very good at it. We have none
of that in the government. In fact, we have a vast body of law and
regulation that’s been created to prevent it from happening. If one of my
employees set up a seamless web with a supplier, he’d go to
jail—seriously. We need to find ways to get those relationships right. Steve
Lockwood was touching on that a bit. We need to find ways to enhance
this set of relationships to remove the obstacles—legal, and even more
importantly, perceived obstacles between people cooperating with each
other in new and unusual ways. Once you get those sets of relationships
right, the financing mechanisms and other mechanisms will follow
because the market that you set in motion will demand that they be
generated. To try to do that in the abstract is impossible.
We’ve heard several times here today people talking about the inefficiency
in the system. Quite frankly, the inefficiency in the system is its salvation.
The redundancy in the system is the salvation. That’s why the system can
respond so well to unanticipated events. That’s why the nation’s
inventories moved from its warehouses to its roads and rails in a very
short period of time and no one noticed. It happened rather seamlessly.
That’s why we’ve been able to respond as we have because of that built-in
redundancy. Yes, it’s messy. It’s not pretty. It’s not intellectually satisfying
in any way, shape or form. But it makes a great deal of sense in a very real,
messy world, where you’ve got to be able to respond.
The critics of demonstration projects view them as inefficient. I don’t think
that anyone has more demonstration projects than Pennsylvania. The
cynic among you may say that I’m about to say this because of Chairman
Shuster. That’s a very good reason to say it. But I’ll say it for a second
reason: it’s the truth—demonstration projects are not a problem. They’re
not even a little problem. First of all, most of them are in line with the
long-term needs and wants of the people. Our Congressmen are rational
human beings, who are elected by their constituents for a purpose. And
they express themselves well and accurately. They have directed some of
our programs in certain directions. But the truth of the matter is that in
Pennsylvania, the vast amount of our resources is spent on the
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Presentation by Bradley L. Mallory,
Secretary, Pennsylvania Department of
Transportation
preservation of our existing system. The split between maintenance and
new construction I find is almost always incorrectly stated because
people, I think, misunderstand the difference between new construction
and reconstruction—heavy maintenance, if you will.
A Modest, Incremental Our program is almost exclusively maintenance oriented, as it should be.
Approach Is the Answer There isn’t a need to build a great deal of highway capacity, and we
couldn’t anyway, as I’ve already described. What we need to do is move
beyond—we need to secure that maintenance philosophy and then move
on to Steve Lockwood’s point of an operational concern. That’s where the
interaction with the customer will generate a new set of relationships.
When we get those relationships right, the rest will follow.
This may sound relatively modest to you. I don’t know how many of you
heard Frank Francois’ speech at the Transportation Research Board
awards luncheon. He gave 10 predictions. I won’t go into them now, but I
think many people from outside the community would have sat there and
thought to themselves—that’s sort of modest forecasting. There’s nothing
too exciting there or earthshattering or new. And that’s exactly right, there
wasn’t. He was, to my way of thinking, entirely correct. It is a modest
incremental evolutionary approach, and I think that’s what’s required here.
I don’t think we need to do massive surgery on the system we have. I think
it’s going to produce reasonably good results. I think the environmental
issues are a thorny problem for us. I particularly enjoyed Mr. Dunn’s
presentation this morning because I think he has hit on a very important
point. This isn’t about bad cars. If cars are bad, we’re bad because they’re
part and parcel of what we are all about in this country. We may not like
that. Apparently some people don’t like it. But it is reality.
We’ve got to find ways to get that set of relationships right with the
environmental community so that we gain their trust and respect, so that
we can continue to provide our customers—our people—what they want.
What they want is to be able to get around. I think we have enough money
to do the job right if we’re very, very smart. I don’t think that we have the
relationships right yet. I don’t think that we’re quite clever enough about
how we marshal our arguments—marshal our assets and then apply them.
That’s why I make the proof by assertion that finance is not the issue. In
fact, what we need to be about is enhancing the set of relationships. I
would encourage those of you working on the Washington scene at every
turn to take the path that provides more flexibility. When the Governors
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Presentation by Bradley L. Mallory,
Secretary, Pennsylvania Department of
Transportation
come and say they want more flexibility, people’s eyes glaze over—just
give us the money and run. I know that’s what you think. In part they mean
that too—of course they do. But on their better days, what they mean is,
“Give us more tools and options.” We live in a very messy world where
circumstances change four times a day. The more tools and options we
have, the more redundancy within the system—and yes, even some
inefficiencies—the better off we’re going to be, once that new thing comes
flying out of the blue at us. We’ll be able to scramble, pick one tool up, find
it’s got a whole new application, and use it to solve the problem.
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Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
“With all the talk about innovations in finance, not much as changed in the last 10 or 15
years. We are still financing transportation in about the same way we did in the past—at
least at the state and local level—for state highways.”
About 3 years ago, I published a study on the accuracy of toll-road
feasibility studies, which has permanently endeared me to feasibility
consultants. The conclusion of my study was that, on average, about one
of four toll-road deals will probably default if the accuracy of the studies
do not improve—most studies are done to about a 50-percent rate of
accuracy. The problem is that you don’t have a bell-shaped curve with
regard to accuracy—you have a curve that has almost no upside. There is
very, very little upside if you do a toll road, but a lot of downside. The
question is, how much downside?
Transportation The flip side of what Steve Lockwood said about user charges is
Financing Is Little interesting—with all the talk about innovations in finance, not much has
Changed changed in the last 10 or 15 years. We are still financing transportation in
about the same way we did in the past—at least at the state and local
level—for state highways. Taxes and bonds are only 7 percent of all the
money, and user charges are the rest. We are still in that world, and I don’t
think that it’s going to change for the foreseeable future.
The only part of the whole transportation world where there is private
funding is in railroads. I noticed in conversations at this conference that a
lot of people are asking, “What’s going on in freight railroads?” I think the
reason that we do not know is because we have nothing to do with it—the
equity analysts follow the railroads. We almost never talk about that piece
of the equation, but that may change as time goes on.
Maintenance Funding Is We currently have $70 billion of outstanding debt at the state and local
Lagging levels for highway purposes, of which, about one third is supported by
tolls. Virtually all the increase in toll bonds sold by local governments have
come in the 1990s—this is where we’ve seen innovations on the financing
side. In addition, we have had a lot of financing. In the last 2 years, on the
basis of taxes and debt sold, there has been a big increase in state and
local government dollars going into highway construction. Have the
methods that we’ve used so far worked? I think we have to give a pretty
good grade—at least a “B.” Capital outlays on a real basis have gone up
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Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
dramatically in every year except from 1992 to 1996. The converse is that
we have not done a very good job on maintenance. Maintenance outlays
are virtually flat on a real basis. My answer is that maintenance is an
awfully unsexy business. If you can figure out a way to get all the financing
types to work on maintenance, that may solve some of the problem. With
an aging highway system—like an aging house—maintenance should have
been going up on a real basis over the last 15 years. So—pretty good
grades on financing the sexy part of it—new roads and added
capacity—and not so good grades on maintenance.
Flexibility and Innovation There has been real change in financing flexibility in the last couple of
in Financing years. State and local governments are permitting innovation, and
Congress has finally allowed some new uses of federal money. The San
Joaquin Foothills Transportation Corridor and the Eastern Foothills
Corridor are examples. I know the Eastern Foothills Corridor intimately
because we were senior managers of that financing in 1995. I’m pleased to
say that as it has opened over the last 2 months, its forecast has proven
reasonably accurate. There was a federal line of credit on both
projects—only $120 million, accessible to $12 million a year. They used the
federal line of credit actively to restructure the bonds in 1997. Although
San Joaquin’s forecast was well short of projections, it would not have
gotten bond insurance that enabled it to avoid even more significant
shortfalls in forecast without the federal line of credit. One of the things
that has not come up today is taking advantage of new transportation
construction—taking some of that gain from development and using it to
build roads and transit.
Zero coupon bonds are a wild innovation, compared to the way toll roads
were financed in the 1950s. At that time, you did them, you restructured
them, and you restructured them again. Thanks to Congress, you cannot
restructure taxes and debt very often because you can only advance or
fund one time. Unless you want to go into bankruptcy, that means you’ve
got one opportunity. Zero coupon bonds magnificently allow toll-road
increases in usage to match up with the maturity of the debt. The
disadvantage is it leads to an extraordinary amount of debt on the future
value basis.
Allowing the states to pay maintenance expenses really was a significant
innovation. We don’t really think about that as innovative, but it was—it
was a partnership with the state. I-470 uses zero coupon bonds—local
license fees mixed with toll usage. Dallas North Tollway, heavily touting
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Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
how much money was put in at the state level, had bond insurance at the
beginning because it had not established a basic draw. In the last year, the
Connector 2000 project in South Carolina came out with a public-private
venture that effectively provides that a private firm will be responsible for
future operations. It is, probably, in many people’s mind, the weakest of
the projects. The state accepts subordinated payment for a period of time
for maintenance. We have not built a lot of miles with this innovation, but
we have issued a lot of debt.
The final development is the Garvey bond that comes directly from TEA-21.
Garvey bonds are the sexy products in the tax-exempt market right now,
and I’ve been talking to some state departments of transportation about
them. For the first time, the marketplace has shown the willingness to
have long-term debt secured by an appropriation process that is shorter
than the maturity of the bond. Ten years ago, if you told me that you could
sell grant anticipation notes, I would not have accepted it. If you told me
you could sell a grant anticipation bond, I would have said you were crazy.
Well, Massachusetts did that to finance the Boston Central Artery. I expect
to see many states using these bonds as a way to jump-start all the new
money that’s coming out.
Potential Advantages of Many people do not realize how unique the U.S. financing market has been
the Existing Regime for public infrastructure. The previous European model was strictly a
government-financed model at the sovereign level. There was some
subsovereign involvement, but it was basically a sovereign financing
model. Europeans went directly through the quasi-public model that we
have in the United States to a private model. It is being developed around
airport funding, but we’ve seen it certainly on the highway side as well.
In the United States, an obstacle to innovation is that we have created a
favored market for financing infrastructure through the existence of
tax-exempt bonds. We have a revenue bond concept. It effectively is a
model not dependent on national government largesse, but with some
degree of market discipline—a kind of a quasi-corporate financing model.
Tax-exempt bonds themselves provide specific benefits. They are the
lowest cost of capital, without question. They also give access to an
investor base and do not have to compete against equity financing or
Internet stocks. Tax-exempt bonds are investor based and focus only on
government finance, with the small exception of the nonprofit sector.
Tax-exempt debt also has structuring advantages such as the selling of
zero coupon bonds, one of the innovations in the San Joaquin project.
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Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
However, talk to a taxable trading desk about selling zero coupon bonds,
and their eyes glaze over. This is because you have to pay taxes every year
on the accretion. With tax-exempt financing, you get no accretion. There
are all sorts of advantages in terms of how the market works. Finally, I
think government has the time and money to tolerate long development
periods for new assets. When Steve Lockwood and I first met each other
about 4 1/2 years ago, we worked on S.R. 125 for about a year and realized
that it was going to take a long time to get finished, so we dropped out of
the process. I don’t know if they now have the second, third, or fourth
banker involved in it, but only government has patience for that long-term
time frame.
What Are the Limitations? The federal grant system is still the easiest method of financing, even
though there are strings attached. It is money and there’s nothing I’m going
to tell you that beats having dollars from the federal government.
Governments are neither risk-takers nor innovators at heart—that really is
not the focus of government. As we know in the municipal market, the
goal of financing these days seems to be creating a commoditized product
so bond insurers can slap on insurance. The creation of commoditization
doesn’t necessarily create innovation. There are certainly some reasons to
question whether we will have enough innovation. The municipal bond
business itself is also very isolated. It’s amazing how isolated those of us
are in the tax-exempt business from the rest of our firms. The truth of the
matter is that we are not necessarily attached to the best ideas, and that
will become an issue over time. Tax-exempt bonds also have a very limited
investor base, courtesy of the Congress. The only people who buy
municipal bonds are individuals with mutual funds, although there is
limited insurance company purchasing. But infrastructure financing in the
United States is almost fully financed by private individuals. I’m not sure
that’s a good long-term situation.
Finally, state infrastructure banks seem to be going nowhere. So that
innovation hasn’t done very well. Also, people hate tolls. I keep trying to
come up with a way to do innovation that does not involve tolls, but they
have to come into play in some way. The fight, as I see it, is going to be
between the increasing use of tolls and new technology that is
phenomenally different. As people begin to forget the current system of
finance, tolls are likely to be more acceptable. That will bring great
change.
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Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
Where Global Finance Is In discussing where global finance may be heading, I do not want to
Heading defend tax-exempt bonds because it’s an endless argument in Washington.
Tax-exempt bonds continue to have a very real place in the process
because of their positive factors. There are many reasons to believe that
the value of tax exemption outweighs any question of inefficiency in
market allocations.
A more viable model requires the use of tolls for several reasons. First,
stand-alone project finance is not the best way for us to finance capacity.
There seems little question that existing state toll-road authorities will
have to step up to the plate and be willing to use their existing capacity. It
is a lot cheaper to finance off of an existing revenue base than it is with
new projects. You get higher ratings, much lower financing costs, and you
don’t have to buy bonds.
What if we didn’t have tax-exempt bonds? What if Congress finally decided
that tax-exempt bonds are gone? We would have very rapid innovation in
financing highways in this country. Tax-exempts are really a crutch in
many ways because they’re so easy to use. One of two things may happen.
States will continue to issue taxable securities at interest rates that will be
30 or 40 percent higher than tax-exempt debt. That necessarily reduces
impact. Coverage numbers go down and the amount of roads that you can
build under that model goes down. Basically, the elimination of
tax-exempt financing will require state and local governments to raise
taxes to finance higher cost debt. The alternative, if you have tolls, is a
private-sector version of financing and a sure revenue stream that will
allow private companies to come into this business and begin a lot more
financing. Equity is not cheap. A lot of people think that private company
financing is a much cheaper way of doing the tax-exempt model. That is
not true. It’s an alternative model. It is a model that by its nature provides
more innovation, more creativity, and perhaps more efficiency. But it isn’t
absolutely a better model than what we have today.
Privatization I did an exercise of turning some of our state toll-road authorities into
private companies and creating initial public offerings for these
companies. Right now, state and local governments are as flush as can be.
If we get into a recessionary environment, my guess is that they are going
to feel really pressed for money, and change will come in that
environment. When they seek more private involvement, the question will
be making better use of the assets to meet needs. States might consider
their turnpikes as a source of money. For example, the Massachusetts
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Appendix VIII
Presentation by Robert H. Muller,
Managing Director, J.P. Morgan Securities
Turnpike in 1996 would have fetched, under my model, about $200 million
to $250 million. Its outstanding net debt was $390 million—before the
Boston Central Artery. Using some standard ratios from other types of
privatization, I found that there was not enough money at the existing toll
level to pay off their taxes and debt. That implies a large subsidy and
certain policy issues. The New Jersey Turnpike was even more interesting.
I came up with about $1 billion off the turnpike against $2.1 billion of debt.
The answer is that you would not have been able to sell the New Jersey
Turnpike. By contrast, when I did the same exercise for airports, the very
interesting result was that you can clearly sell airports in the United
States. Aside from the federal grant issue, they generate a substantial
positive net benefit for the community that owns the airport. I think that’s
the reason why we’re seeing some European airports becoming viable
private companies. The bottom line is that a corporate financing model for
highway finance will require very dramatic changes in the willingness of
consumers to pay for services.
As Steve Lockwood said, there are niche opportunities for the private
sector to pick off pieces of this market. But, for the foreseeable future, I
see little likelihood of a major alternative model to the way we finance
highways today. We should continue the innovations that we have talked
about during the conference. We should continue to defend taxes and debt
because of the advantages that they provide, and where possible, privatize
a lot of the services.
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
“We can’t solve problems by using the same kind of thinking that we used when we created
the problems in the first place.” (Albert Einstein)
Those who have heard me either in Committee or in forums like this know
that I love history and like to reach back into history. It’s important to
know, as Lincoln said, where we have been so that we may better
understand whither we are tending. If we had had a conference like this at
the turn of the last century, it would have been when the first prototype
automobile by Henry Ford was just being built. It was only 5 years old.
The beginnings of transportation as we know it today were stimulated by a
group of bicyclists, which is one of my passions. A group of cyclists in
1894 petitioned the U.S. House of Representatives for an appropriation of
$10,000 for the then-predecessor of the Bureau of Public Roads—the
Office of Road Inquiry, a small agency in the Department of
Agriculture—to study the possibility of developing a system of paved
surfaces, to get those new-fangled horseless carriages off the routes that
the bicyclists were using. Because those predecessors of automobiles
were causing ruts in the pathways, they were causing, consequentially,
bicyclists to take what they then called “face plants.” The bike would hit
the ruts, they’d go over the handlebars, and go smack face first into the
mud. Congress accommodated the request and appropriated $10,000; the
study was undertaken. A few years later, the Bureau of Public Roads was
established, elevating the Office of Road Inquiry to a higher level in the
Department of Agriculture. That began what we know today as the Federal
Highway System.
The study built on an initiative by the Office of Road Inquiry, which
developed what we call today a map of paved surfaces; those that were
gravel crust and those that had macadam. It found that only 7 percent of
the 2.1 million miles of roadway had any kind of surface at all. Usually,
they were just formed by a cow who had trampled down the grass, and
that became a roadway. Those that were more sophisticated used some
kind of compression means to pack down the surface—a very few had
macadam surface—7 percent of the 2.1 million miles.
That conference, had we convened it then, would have been 4 years prior
to the first transcontinental road trip. You can imagine a group like this
gathering around and thinking about what surfaced roadways might look
like—questioning the need for them. Simon Newcomb, a noted American
astronomer of the time, confidently predicted that, of course, it is folly to
think that man can fly long distances in heavier-than-air craft. In 1893, a
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
prominent newspaper editorialized that the horseless carriage movement
will of course come to naught. A decade plus later, the 1 millionth Ford
rolled off the assembly lines. This leads me to conclude that futurists are
often wrong, often make judgments based on inaccurate, incomplete, or
insufficient information, and probably ought not to be dabbling in the
future. But if we don’t, we’ll never get there.
Twenty years after that first transcontinental trip, a young U.S. Army
officer fresh out of West Point by the name of Eisenhower accompanied
and led a convoy across the United States. He noted the shortcomings of
this network of gravel, stone, and mud surfaces. He wondered how the
United States could defend itself adequately if called upon in a time of
emergency. He didn’t forget that experience. Later, as President, he asked
the Congress to reawaken a study done in 1944 by Congress or
commissioned by Congress in 1944, just as World War II was coming to an
end. He directed a study of a 44,000-mile interconnected network of
highways across the United States. Eisenhower, remembering his own trip,
asked the Congress to develop what became known as the National
System of Interstate and Defense Highways, which he signed into law in
June 1956. It also included an innovative financing scheme.
My predecessor in Congress, John Blatnik, was one of the five co-authors
of the Interstate Highway System and the Highway Trust Fund. They
thought they had accomplished a work for all time. Of course, nothing
needed to be done except to watch over the development of a 42,500-mile
network of highways that theoretically crossed the United States from
coast to coast and border to border without a traffic light. Well, that was
before population growth. That was before transportation began driving
the development of everything in our economy, expanding growth and
exploding population. It is a far cry today from 1956, when that legislation
was enacted, with over 565 million vehicles traveling the nation’s
roadways and a trillion passenger miles every year. It’s the most
extraordinary development. But not so extraordinary when you come to
think that Americans own three-fourths of all the trucks and half of all the
cars in the entire world. They need some place for them to drive.
But it certainly wouldn’t have been envisioned in the imaginary conference
that I mentioned at the turn of the last century. So let’s hope that here at
the turn of this century we do a little bit better in thinking ahead to where
we need to go. Oliver Wendell Holmes observed, “I find the great thing in
this world is not so much where we stand, as in which direction we are
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Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
moving.” We must sail sometimes with the wind and sometimes against it.
But sail we must, not drift, and not lie at anchor.
That certainly should be the challenge of this conference. Where will
America sail in the 21st century? What will be the legacy of the
post-Interstate era? That was the question I began asking as Chair of the
Oversight Subcommittee in the 1980s, what will the post-Interstate era
look like. Where are we headed? In the course of the hearings that I
conducted, we had a number of tantalizing thoughts. Demographics were
changing. Predictions in 1986 and 1987 were that by the end of this decade,
which we are approaching, half of all drivers would be 50 years of age and
older. Well, that suggests some new ideas about road surface, markings,
reflective surfaces, driving habits, and driving conditions. It also suggests
some new ideas about the kind of driving that people would do—more
leisure miles driven and more people taking vacations (maybe longer
duration), using the Interstate to get to the point of their vacation travel,
and then using the non-Interstate roadways of this country for the balance
of their travel.
Something that emerged along with those hearings was a demand for a
change in the quality of peoples’ driving experience. Drivers want more
than the neat, separated grade-crossing controlled Interstate highway
system—something that shows more of America’s scenic, cultural, and
historic treasures. Out of that arose my idea for a Scenic Byways Program,
which I crafted and with the help of numerous groups, tourism and
environmental organizations, put together and made it part of ISTEA in
1991. Millions of miles are driven on the scenic byways of this country. We
have 14 national scenic byways, 11 all-American roads and hundreds of
state-designated scenic byways. In addition, these roads are a powerful
driving force behind America’s $92 billion in-bound international travel
and tourism, with a $22 billion positive balance-of-payments benefit to the
United States.
The other ideas that emerged were that people wanted something more
than just more road surface—a better quality of life in their communities.
They wanted an enhancing rural and urban life, and out of that came what
we know today as the Enhancements (contained in ISTEA and TEA-21). In the
20 years prior to ISTEA, only $40 million had been spent on bicycle
provisions and converting railroad grade beds to bicycling paths and
pedestrian walkways. Providing (in ISTEA) a 10-percent set-aside of
enhancements program for bicycling facilities, converting railroad grade
beds to bicycling paths, and mandating the establishment of a bicycling
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
coordinator in every state Department of Transportation led to the
development of a state bicycling road plan. A billion dollars has been spent
in the lifetime of ISTEA compared with $40 million in the previous 20 years.
Three thousand two hundred forty bicycling projects are all across
America—10 million more Americans bicycling than 7 years earlier
because of a massive change in our lifestyle—a more aerobic
lifestyle—people are going to be living longer and healthier.
That was the framework for ISTEA. Add to it congestion mitigation and air
quality improvement provisions that said we should use some of our
Highway Trust Fund dollars to improve the quality of air and quality of our
driving experience in America’s urban centers. To reduce congestion or to
mitigate choke points in urban areas, states and localities have used that
flexibility to transfer $4 billion from highway construction to transit
projects. These innovations led to real changes in the way we think about
transportation in America—something more than just pouring more
asphalt and concrete.
But we really broke through some preconceived notions about our federal
highway program with ISTEA. We carried that forward in TEA-21, the
Transportation Equity Act for the 21st Century. The most important
initiative in TEA-21 was to take the trust fund off budget and reestablish it as
it was originally conceived in 1956 and as it operated until 1968. It’s off
budget within the budget, but it’s guaranteed spending that increases as
revenues increase and, of course, would decrease if revenues dropped, but
not below a certain threshold. The trust fund is indeed secure. Spending is
guaranteed—it cannot be withheld by the Appropriations Committee. In
addition, there’s a 40-percent overall increase in outlays for the states;
guaranteeing that 90.5 percent of every state’s gas tax dollar be returned to
the state.
In addition, we agreed on an 80-20 split of the Highway Trust Fund;
80 percent for highways and 20 percent for transit. I won’t walk you back
through the age-old controversy. But I can remember as a Hill staffer in the
1960s, when the idea was first surfaced of using Highway Trust Fund
dollars for transit projects, the hew and cry and screams of, “This is our
money and you can’t use it for transit.” People would rather choke in
traffic, sit behind the wheel of their car, and breathe in those exhaust
fumes from the guys ahead of them than get their fellow motorists off the
road into mass transit.
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
We’ve changed that, $173 billion for highway and $41 billion for transit. If
you had looked at the program in 1963, when I first started my work as a
Legislative Assistant on the Hill, you would have said, “No way, never.”
But it’s there. It’s also guaranteed spending. In addition to that, we’ve
included provisions in TEA-21 to designate funding for rebuilding existing
transit systems and expanding and constructing new ones. We also
provide funds for magnetic levitation (MAGLEV) and other high-speed rail
development, loans and guarantee programs for freight rail rehabilitation,
and reconstruction and improvement.
We also provided funds for a rather innovative idea—to coordinate land
use and transportation planning. Planning has all too often been a bad
word, an evil term. I remember up along the North Shore of Lake Superior
in my district going to a town meeting when the Coastal Zone Management
program was being planned. One after another suspicious citizen got up
and said they’re going to do it again; they’re going to take our land away
from us; they’re going to plan it out of our hands. I told them that this is
your opportunity. Either you make the plans—either you take this money
and you design how the future is going to look along the North Shore—or
it will just happen without your input at all. Developers will come and
you’ll be screaming at me 20 years from now saying, “Why didn’t you stop
this?”
The county boards and local governments voted against coastal zone
management. Five years later, they asked me to come back. They wanted
to know how to get some of that money and take charge of their destiny.
After a time, planning—the reasonableness of it—settles in with people.
When they understand that it’s a grass roots initiative, they take hold and
do it well, with substantial amounts of funding, in this case, $120 million to
coordinate land use and transportation planning. When dedicated to the
simple purpose that transportation does not have to destroy the
environment, it does not have to destroy quality of life, and citizens can be
entrusted with the decision-making that affects their own life. We’re going
to give that to them.
TEA-21 addresses safety. The $540 million incentive program is for states
that enact a 0.08 blood alcohol standard for drunk driving, punishment of
repeat offenders and for open alcohol containers, and the enhancement of
the national driver register, which tracks dangerous drivers—those who
lost their license in one state and try to get a license in another state. This
is an initiative that former Republican leader John Rhodes and I crafted.
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
We catch something like 500,000 of those drivers and get them off the
roads every year.
Those are all good initiatives. But it’s still not enough. Einstein said that
we can’t solve problems by using the same kind of thinking that we used
when we created those problems in the first place. Some of our old
thinking about highway programs got us there. In ISTEA, and continued and
enhanced in TEA-21, are three tools that help us avoid the kinds of thinking
that got us into the problems that we confront in our current
transportation system: the use of advanced technology, smart growth
concepts, and innovative financing.
Advanced Technology I have taken the train a grande vitesse (TGV) from Paris to Lyons in 2
hours and 1 minute. In 20 years time, they had cut the travel time in half.
There were 3 million air passengers between those two cities and 500,000
rail passengers. Today, there are 500,000 air passengers and 5 million TGV
passengers at 178 miles an hour between those two cities. The five
segments of the TGV are running profitably and are paying for the rest of
the rail system. I’ve been to Tours in the southeastern part of the Loire
Valley where business people commute daily 220 miles to Paris in an hour
and 15 minutes at 180 to 190 miles an hour. The Inter City Express (ICE) in
Germany is achieving speeds of 180 miles an hour. The MAGLEV that
Germany is developing between Hamburg and Berlin at a $1 billion cost
will move 15 million people a year at speeds of 300 miles an hour. I rode
the Shinkansen in Japan from Tokyo to Osaka at 180 miles an hour. They
expect to have high-speed MAGLEV operating in Japan in the next five
years.
Meanwhile, our highest speed on our passenger rail in the United States is
110 miles an hour. Most of the time it’s much less than that. We have
similar corridors, Minneapolis-St. Paul-Chicago, where high-speed rail
would be vastly superior to air travel between those two cities. There’s
also enough population density to make it attractive. Why do we have
high-speed rail in Europe, Germany, France? England is improving its
speed, and the Italians have done the same. Spain has taken the TGV with
a few adaptations. The Japanese are doing it. China is moving in that
direction. But we—the leaders in transportation in the world—don’t. Why?
Because we’re not thinking right.
We will have high-speed rail here in the East Coast with the electrification
of the Northeast Coast Corridor. You’ll be able to travel using the new
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
[Acela] high-speed trainsets up to 150 to 166 miles an hour. That’s high
speed for us. But it’s because we are still thinking about transportation
with the same mind set that got us into these problems in the first place.
We have to get beyond that way of thinking.
TEA-21 provides some funding for us to take advantage of the MAGLEV,
TGV, and other high-speed rail technologies and develop high-speed rail
corridors, which we designate in the act as 10-10 corridors and specifically
authorize out of appropriated funds—but not out of trust fund
moneys—$1 billion for the development of the MAGLEV idea over the next
5 years. Thanks to Senator John Chafee’s vision and determination, we
have the innovative finance program of TEA-21 available to finance the
high-speed rail, including MAGLEV developments, over the next few years.
Unfortunately, high-speed rail took a little setback just about a week or 10
days ago when the new Governor of Florida decided to cancel the state’s
participation in the FOX Overland TGV Corridor between Orlando and
Miami. I don’t have a complete statement of the Governor’s decision. But I
have worked with the FOX promoters, we have put authorization in TEA-21
to enhance that initiative. I think it made perfectly good sense. It was a
good investment for the state and its future. The failure to proceed with it
will just mean more cars, more drain on the resources and more
congestion. In a real sense, high-speed rail is a “Field of Dreams” idea. If
we don’t build it, they won’t come.
The other initiative that I mentioned is Intelligent Transportation Systems.
We invested a lot of money in ISTEA and continued those investments in
TEA-21 to the tune of about $2.5 billion over the next 6 years in intelligent
transportation system concepts. If all the funds are used wisely, I think
we’ll approach the no-hands, no-feet idea of ITS driving with the automated
highway in which cars literally can drive themselves. In fact, I-15 in San
Diego, an 8-mile segment, is a no-hands, no-feet driving demonstration
project. If we carry this concept through, we’ll enable highway managers
to double or triple the capacity of highways by increasing speeds and
shortening distances between vehicles with greater control mechanisms.
We’ve got to test them out. That’s what this is all about.
Smart Growth Concepts What we need is smart growth, not unbridled growth. We need to look
very carefully at the idea of induced travel. There was a very thoughtful
piece in The Washington Post just a few weeks ago about the I-270
corridor. Those of you who are from the Washington, D.C., area and have
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
driven up Rockville Pike and beyond, going up toward Frederick,
Maryland, know what that’s all about. That was a nice four-lane road a few
years ago. Traffic grew and eventually congestion grew along with it. So
the highway folks said, “well, let’s do what we do best—add more lanes.”
So they got 12 lanes. You know what happens when they have all those
lanes? Someone says, “well, I don’t have to car pool any more. I can drive
my own car. I don’t have to use that HOV lane now, I don’t have to be
stuck with my neighbor and listen to his silly conversation. I can drive
myself.”
So now you have congestion. It’s a big story every morning, you look to
see what’s happening on I-270, because more lanes beget more travel,
which begets more growth. One-and-a-half-million drivers a day are stuck
in traffic somewhere in America. The Los Angeles Chamber of Commerce
did a study a few years ago that showed that the cost of congestion is $3.5
billion a year to drivers stuck in traffic in Los Angeles. It costs $40 million
each year to the United Parcel Service and Federal Express just to have
delays. That’s a look at business news. If you like spending time in traffic
with yourself only, then support the continued plan that we have of adding
lanes and opposing HOV lanes and schemes to get some cars off the
roadway and make travel more expeditious, more convenient, and
affordable.
The President has, as part of his State of the Union message, announced
an initiative for sustainable cities, or livable cities, which includes a
$6 billion increase in funding for public transit. It also includes $2.2 billion
for community-based programs with innovative transportation strategies
and regional transportation strategies to improve existing roads and
transit and invite ideas for alternative transportation. I think that’s a good
idea. I want to see the specific legislation they send forth. It’s in the right
direction. This is the kind of thinking that we need to embrace.
Innovative Financing Coming to the third point that we dealt with in ISTEA—finance—the
Highway Trust Fund has spent $372 billion building our Interstate highway
system and its accompaniments. That’s a lot of money. It built the greatest
road system in the world. But it’s not enough. There isn’t enough money to
address all the roadway needs in this country, even with the 40-percent
increase that we provided—even with the guaranteed spending. What
that—the guarantee—will do is assure from year to year that highway
planners, highway engineers, and design people can count on the money
they need for the projects they’ve designed.
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Appendix IX
Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
I was in California last summer for the meeting of the Mineta Institute for
Intelligent Transportation Systems. The Director of CalTrans talked about
the impact of TEA-21 on his department. The increase in funding is so great
they’re going to hire 2,000 engineers to carry out the planning, design, and
engineering of the new roadways they’re going to build and existing ones
they’re going to improve. When it came my turn, I said I would have felt a
whole lot better about the future of transportation if you had added 200
planners to design strategies for dealing with the growth of transportation
in California, instead of just plowing ahead to build. You have to have
some thought going into this as well.
A good example of what is needed is additional funding for sources or
using the available Highway Trust Fund dollars to leverage other
investments to make those improvements in traditional as well as
alternative transportation concepts. The Transportation Infrastructure
Finance and Innovation (TIFIA) provision of TEA-21, also an idea of Senator
Chafee’s, to whom I give great credit for this initiative, is authorized at
$530 million to cover the risk of loans, loan guarantees, and credit
enhancements up to an additional $10.5 billion over the amount
guaranteed in TEA-21. TIFIA will make it possible to finance projects of
national or regional importance. Projects costing more than $100 million
are beyond the means of a state to finance from its highway
apportionment. With the TIFIA money, a state could use these leveraging
dollars to fund transit, passenger rail, and even freight rail projects.
The Alameda Corridor in California is really the forerunner and guide for
this idea. The Corridor provides access to the ports of Los Angeles and
Long Beach. Why is that important? One-fourth of all of our imports and
exports by water go through those two ports. So before you can move
goods by truck or by rail, before you can get them on the boat, you have to
move them by truck or by rail to that port and get them on board to move
by water some place. The tangle of local rail lines and highways and grade
crossings created gridlock that made it impossible to move at a
competitive basis. DOT provided $59 million to finance a loan for the
additional $400 million that California needed to complete a $2.4 billion
project. Their allocations out of the Highway Trust Fund were nowhere
near the amount that they could foresee to complete this project. With the
project financing that makes a $2.5 billion initiative possible to untangle
those rail lines and improve the truck and rail access, trade is expected to
jump from $116 billion to $253 billion over the next 10 years, creating an
additional 700,000 jobs locally. Those are the kinds of initiatives that we
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Presentation by James L. Oberstar,
Ranking Democratic Member, Committee on
Transportation and Infrastructure, House of
Representatives
can undertake with TIFIA and with State Infrastructure Banks, four of
which are authorized in TEA-21.
A new initiative, one I particularly championed and advocated vigorously,
is the railroad loan and guarantee program for the short-line railroads of
this country—those that have picked up the slack from the abandonments
and consolidations of our nation’s freight rails into four national rail lines.
With the funds from the Title V program, as we call it, we will be able to
leverage some $3.5 billion of railroad infrastructure improvement for the
nation’s short-line rails and revitalize small towns and small communities.
Those are the kinds of initiatives that I think we need to undertake. Those
are the three principal areas of innovation of TEA-21. We should have had a
lot more in the way of innovation and new ideas and out-of-the box
thinking in TEA-21. What we did, I think, was about as good as you can
expect of the legislative process in the short run.
If conferences of this nature can stimulate new ideas and new thinking,
that’s good—we have a mid-term correction coming up in a couple of
years, and we need to assess where we are with TEA-21 and make some
adjustments. That’s the place for new ideas. It may not necessarily require
new financing but new ways to leverage dollars, like those that I
suggested. Help us to move our transportation agenda forward.
There were a few cartographers in the Office of Road Inquiry at the turn of
the century who developed a set of maps that laid the foundation for what
became the Interstate system. What we need today are innovative
mapmakers on the threshold of the 21st century to help us chart the map
to take transportation forward from here.
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Appendix X
Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
“A major attribute of international reform initiatives has been to redefine the role of
government by separating policy and management responsibilities from program and
service delivery.”
My remarks will center on the trends of international institutional reform
in delivering transportation programs and services and the implications for
domestic policy and delivery. I recently led a committee that visited New
Zealand, Australia, Sweden, and the United Kingdom—countries identified
as having innovative programs for transportation agency reforms—to
investigate how other countries are coping with budget constraints and
using new tools to manage their transportation programs.
International Trends in Many transportation agencies in countries throughout the world, including
Institutional Reform the United States, are feeling the pressures of privatization in wake of
current government restructuring and downsizing. In short, transportation
agencies are being required to do more with fewer resources. This trend is
part of a larger redefinition of government and business functions and is
by no means confined to the transportation sector. A number of countries
have already implemented the comprehensive restructuring of their
transportation departments, and their experiences present useful input to
the formation of similar issues in the United States.
The road-sector reforms reviewed in several countries are part of an effort
to make government more responsive; to treat the public more as a
customer. It is taken as a given that making the distribution of resources
and contracts more competitive will improve the efficiency and
cost-effectiveness of providers, transportation authorities, and the
transportation network itself. Regulation methods are being redefined in
relation to the private sector—generally becoming more “light-handed”
and results-oriented, to allow for innovative approaches—although there
has been concern that privatization will require more careful monitoring.
There is a move toward greater accountability of government agencies and
to the use of more objective, careful, and inclusive real-cost accounting as
a means of allocating scarcer resources through the use of cost-benefit
ratios and performance measures. A concern of note is the issue of public
trust.
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Appendix X
Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
Redefined Public and The transportation reforms in the countries surveyed were found to be
Private Roles part of an overall reevaluation of the appropriate nature and extent of
government activity in response to a government mandate or some degree
of financial crisis. In the reorganization of government, there has been a
greater distinction drawn between policy formation and management and
the delivery of services and facilities. The decision that has been made, to
a greater or lesser extent, is that service delivery is best provided by the
private sector, partly in response to the process of governmental reforms
and demands for greater cost-effectiveness. In all of the countries
reviewed, reform began with reevaluating and clarifying their
transportation agencies’ core functions and responsibilities and roles
within the organization and identifying those functions best transferred to
the private sector. As an alternative to total outsourcing, public policy in
some countries allows—if not requires— providers to operate as profit
centers or publicly owned enterprises, which compete directly with
private companies, collect a profit, and pay taxes. Sweden has adopted
this approach, at least in principle, as a means to maintain quality
standards and prevent the very few major private roadworks contractors
from behaving as an oligopoly. One of the most important and successful
changes in structure adopted by all the countries surveyed was an explicit
separation of buying and selling roles within the agency, forcing project
decisions to be made more carefully and reducing conflicts of interest.
There is also an effort to transfer some of the public risk in transportation
infrastructure development to the private sector, as evidenced in several
trends: a variety of turnkey programs are being used successfully in the
United Kingdom and Australia, variously referred to as
design-build-finance-operate (DBFO), build-operate-transfer,
build-own-operate-transfer, and design-construct-maintain according to
their specified contractual obligations. So far, the United Kingdom
particularly has seen significant cost savings with its first eight DBFO
contracts in comparison with its standard system, which routinely ran
over budget. In principle, these contracts are deliberately made rather
long-term (up to 30 years of operations) and comprehensive in scope to
apply the same incentives and responsibilities to the private company that
a public authority would have to operate under.
All countries are also beginning to outsource maintenance work under
similar contracts (3-5 years) that are more “performance-based” than
“specification-based.” The United Kingdom also uses “lane rental
contract” clauses to keep as many lanes open as possible during
maintenance and construction activities. Other than through the DBFO
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Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
projects, the idea of transferring design activities to the private sector is
treated very cautiously out of concern for maintaining consistent safety
and quality standards and because there may not be enough highway
design work in the smaller countries to support more than a limited
number of private companies; however, most do express interest in having
foreign firms compete in this area as well. With the transfer of
responsibility for service delivery to the private sector comes a certain
degree of authority as well.
Transportation Initiatives Transportation departments in the countries surveyed were under great
and Links to Economic pressure for financial accountability. Tolls, except for bridges, were
Viability generally disliked, although they were being reconsidered and there was
some warmth toward electronically assessed tolls, which might also be
used to distribute traffic by encouraging the use of alternate routes. It was
observed that only New Zealand had dedicated funding sources
comprising of user fees for transportation (although Australia’s
transportation funding at the federal level is intended to correspond to
income from fuel taxes and registration fees, strictly speaking, the moneys
come from general revenue) and, instead, must compete for funding with
other government agencies during each budgeting period. While fees from
highway users are collected in all countries, the fees typically accrue to
the account of the general fund for allocation during the normal budget
cycle. Even in New Zealand, highway user fees are used for nonhighway or
transport-related purposes. Generally, there seemed to be only little,
though growing, acknowledgment of the importance of transportation
infrastructure to economic growth, especially by national governments
(other than Australia, which considered it instrumental and invested
heavily in its highway system through the 1980s). Sweden explicitly
considers transportation investment as an important means to equalize
regional development. Wales, which recently decided to double its
transportation investment, saw greatly increased economic growth
compared with the rest of the United Kingdom.
Cost-benefit analysis has been one of the major ways in which this
business-like approach has been expressed. Such analysis systems are
increasingly being used to prioritize projects and allocate resources more
objectively. The costs included in this analysis vary, however: some
include costs related to noise, environmental degradation, aesthetics, and
delays, and some do not. Some include a comparison with the costs of a
do-nothing option. Mostly all include items related to safety. There is
interest in making these analyses very generic to facilitate a comparison
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Appendix X
Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
between regions and internationally. These analyses are very much
works-in-progress but are being pursued enthusiastically.
This new businesslike approach has allowed the public sector to level the
playing field with the private sector in certain circumstances. In some
cases, the public sector has been allowed to compete with private-sector
firms, most notably in Sweden and Australia, and the public sector has
been able to hold its own and gain a number of contracts on its own
merits. In both of these countries, the public-sector firms must allow for
certain rates of profit and pay taxes in a manner that makes them operate
with many of the same constraints as their private-sector competitors.
Although there have been discussions about the lack of equality between
private- and public-sector firms in Australia, VicRoads has let its in-house
teams compete and has seen them compete well. The experiences of each
country suggests that there have been mixed results to date; however,
most officials agreed that overall direction has yielded short-term benefits.
Some agencies have set goals for their units in competing with the private
sector, which has proven to be both successful and viable.
One concern was retaining core competencies within the transportation
agencies, many of which had been drastically downsized. All placed a high
priority on retaining their experts for a variety of reasons, including
contract writing (especially important to be done carefully when contract
arrangements and types are changing) or a sense that privatizing
necessitates more careful monitoring. There is concern for the training of
future transportation professionals. Research efforts have generally
suffered under privatization, except in Sweden, where transportation
research is supported by the SNRA, which also collects statistics related to
road use, and through grants distributed by the KFB (Communications
Research Board).
The major component to operating in a businesslike atmosphere is the
effect of competition. It is a common perception in all the countries
surveyed that making the provision of service subject to competitive
tendering is the most significant means to increase efficiency and
encourage innovation. It therefore is important that there be enough firms
to provide sufficient competition to offset tendencies toward oligopoly,
which is a significant concern for some of the smaller countries.
Since this current businesslike state is evolving, it is impossible to foresee
what it will lead to in the future. However, some trends have begun to
emerge. The overreliance of a cost-benefit analysis can lead to encourage
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Appendix X
Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
short-term or suboptimal decisions unless some mechanism is in place to
allow for long-term implications to be more readily factored into the
process. With the changing roles of the public units, the training of
personnel has become a concern. In general, the public agencies have
been a source of human capital for the private firms. In addition, they have
traditionally provided formal instruction and training coupled with
on-the-job experience. The reform and its impact on the traditional public
agency has altered this process both in the quantity of technically and
professionally qualified people with skills desired by the expanding private
companies but in the training activities. The result has been that the
private companies have recognized their mandate to include training in
their annual budget process. Similar trends are occurring in research
where the private sector recognizes that it must include research and
development in its activities as the public agencies scale down their
involvement. With the shift of emphasis from the public to private sector,
the public sector has dropped its lead role in both of these areas. It is now
up to the private sector to fill the void left by the public sector and
increase their emphasis in these two crucial areas.
Because of the increasing influence of the private sector, a check is
needed to ensure that the job that they are doing is meeting requisite
quality and is as efficient as possible. The governments of the selected
countries reviewed are moving toward a system of performance measures
that would allow them to oversee the areas of the road system, which they
view as being important, while using the fewest number of employees. The
performance-based approach is intended to ensure receiving the quality of
work for which they had contracted. These countries still find themselves
in the developmental stages of creating such a performance-based system
and also an accurate transportation database. It is believed that such a
system will allow internal comparisons to be made, thus ensuring a quality
return on public investment.
Implications of All of the countries surveyed were and are in significant transitional
International periods, all to varying degrees moving toward lighter regulation and
Transportation Trends adoption of the business strategies of the private sector. Change in all
agencies was initiated either by crisis or government mandate, as part of a
policy of some branch/authority in the national government, rather than
internally from the transport authority itself. While their experiences offer
some valuable lessons, it is important to remember that these reforms
would be considered works in progress; their long-term implications have
not yet played out. The implication of these international trends on
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Appendix X
Presentation by C. Michael Walton,
Chairman, Department of Civil Engineering,
University of Texas/Austin
domestic policies governing the delivery of transportation programs and
services is intriguing. Several key observations are summarized for
discussion purposes.
In considering the implications of these valuable experiences for our
situation, it is useful to keep several factors in mind. Essentially, it was a
top-down reform, and these governments are going through major change.
To a certain extent, they started at a position that was much different from
ours and have gone now beyond us in many cases. One example would be
in the selling off assets that have traditionally been in the public domain.
In their case, railroads are one of those assets—unlike the United
States—as are airlines, ports, harbors, and airports. In the rail industry, the
infrastructure was separated from the operating authority, with separate
companies for each. We, of course, are not in that position.
A major attribute of international reform initiatives has been to redefine
the role of government by separating policy and management
responsibilities from program and service delivery. Public trust is a
concern, and the funding constraints associated with each. By saying it’s a
business approach to delivering transportation, we’re saying that we’re
bringing competition into the fore. The long-term implications are not
clear. But the short-term benefits are widely touted—in many cases, a 15
to 30 percent increase in efficiency or maintenance expenditures as well
as in new construction.
In all cases, there has been a decrease in the size of government. The focus
has been on maintaining core competencies in critical areas—that’s part of
defining the government role. There has been increased competition
across the board. Public units are competing among themselves and with
private units domestically and internationally. Some public units are
encouraged to compete internationally as well as domestically.
There has been general dissatisfaction with some aspects of services
provided by the private sector—for example, in the design of a
transportation facility. As a result, these countries have adopted quality
assurance standards. The use of benefit cost analysis and performance
measures is evolving in a variety of ways.
I think the lessons learned from these international experiences will reveal
some significant opportunities to help us meet the transportation
challenges of the 21st century.
Page 77 GAO/RCED-99-176 Surface Transportation
Appendix XI
Profile of Speakers
Peter “Jack” Basso, Assistant Secretary for Budget and Programs at the
U.S. Department of Transportation. Mr. Basso joined the Office of the
Secretary in 1995, when he was named the Deputy Assistant Secretary for
Budgets and Programs. Previously, he held several financial and
administrative positions within the Federal Highway Administration, an
agency within DOT. From 1990 to 1995, for example, he was the Director of
Fiscal Services for FHWA. He has served as a member or chairman of
numerous councils and committees, including the President’s Council on
Management Improvement and the Small Agency Council. He also served
as Deputy Chair for Management at the National Endowment for the Arts
and as Assistant Director for General Management at the Office of
Management and Budget.
Anne P. Canby, Delaware’s Secretary of Transportation, has over 20
years’ experience in transportation administration, strategic planning,
finance, budgeting, and management. Appointed as Secretary in
March 1993, she has focused on applying an integrated multimodal
approach in constructing and preserving Delaware’s developing
transportation network. Prior to her appointment, she was a partner in the
transportation consulting firm of Canby, Cameron and Company and the
Principal of Canby Associates. She also served as Treasurer-Controller for
the Massachusetts Bay Transportation Authority, as a Commissioner of the
New Jersey Department of Transportation, and as Chair of the New Jersey
Transit Board of Directors.
Anthony Downs, Senior Fellow at The Brookings Institution (a private,
nonprofit research organization specializing in public policy studies) in
Washington, D.C. He previously chaired the Real Estate Research
Corporation, a nationwide consulting firm advising clients on real estate
investment, housing policies, and urban affairs. He has served as a
consultant to many of the nation’s largest corporations; major developers;
local, state and federal government agencies (including the Department of
Housing and Urban Development and the White House); and private
foundations. He is the author or coauthor of numerous articles and books,
including Stuck in Traffic, New Visions for Metropolitan America, Political
Theory and Public Choice, and Urban Affairs and Urban Policy. Dr. Downs
is a frequent speaker on real estate economics, housing, urban policies,
and other topics.
James A. Dunn, Jr., Professor of Political Science and Public
Administration at Rutgers University/Camden. He was an Alexander von
Humboldt Research Fellow in European transportation policy at the
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Appendix XI
Profile of Speakers
University of Bonn and a National Endowment for the Humanities scholar
in modern French politics and transportation policy at the Institute of
Political Studies in Paris. Dr. Dunn has written articles on a range of
topics, including the outlook for high-speed rail in North America. He is
the author of Miles to Go: European and American Transportation Policies
and Driving Forces: The Automobile, Its Enemies, and the Politics of
Mobility. In 1987, he received the Rutgers Presidential Award for
Distinguished Public Service for serving as Chair of the South Jersey
Transit Advisory Committee.
Stephen C. Lockwood, Vice President of Parsons Brinckerhoff, the
nation’s largest transportation planning and design firm. He manages its
special Finance and Economics group and serves as Senior Technical
Advisor on projects involving Intelligent Transportation Systems planning,
public private partnerships, and multimodal applications. He previously
served for 3 years as FHWA’s Associate Administrator for Policy, overseeing
policy development and new legislation, as well as strategic studies and
international programs. In addition, he directed the Transportation 2020
Alternatives Group, a coalition of state and local government interest
groups dedicated to reshaping national transportation policy for the 21st
century, and served as vice president of a major national and international
consulting firm. Mr. Lockwood chairs the ITS -America Task Force on
Regional Deployment and is Vice Chair of the American Road and
Transportation Builders Association, Public-Private Ventures Division.
David Luberoff, Associate Director of the Alfred Taubman Center for
State and Local Government at Harvard University’s Kennedy School of
Government. His research and writing focus on the political economy of
infrastructure and land-use policies. He is currently coauthoring a book on
the politics of large-scale urban infrastructure projects, which will draw
heavily on a 1996 political history of Boston’s Central Artery/Third Harbor
Tunnel project. He is also a columnist on infrastructure issues for
Governing magazine and was co-editor of The Public’s Capital, a quarterly
forum on infrastructure issues. Before joining the Taubman Center, he was
the editor of the Boston Redevelopment Authority’s 1987 Midtown
Cultural District Plan and served as editor-in-chief of The Tab, greater
Boston’s largest group of weekly newspapers.
Bradley L. Mallory has been Pennsylvania’s Secretary of Transportation
since March 1995. Under his leadership, the Pennsylvania Department of
Transportation has redirected $170 million from overhead to road work
and achieved a $550-million-per-year revenue enhancement for highways
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Appendix XI
Profile of Speakers
and mass transit. Mr. Mallory previously served as counsel to the law firm
of Dechert Price and Rhoads. From 1977 to 1989, he served in a variety of
management positions at PennDOT, spending 3 years as Director of Strategic
Planning and 3 years as the first Deputy Secretary for Aviation, Rail
Freight, and Ports and Waterways.
Robert H. Muller, currently the Managing Director of Municipal Bond
Research at J.P. Morgan Securities, has been active in municipal and
health care research for more than 25 years. Before joining Morgan in
1981, he worked for Standard and Poor’s Corporation and E.F. Hutton and
Company. The past three Institutional Investor surveys ranked him as the
top transportation analyst in municipal bonds, and prior surveys identified
him as the top generalist analyst. He is a member of the Society of
Municipal Analysts and has served on the Blue Ribbon Committee on
Secondary Market Disclosure of the National Association of State
Auditors, Controllers, and Treasurers and on the board of the Government
Accounting Standards Advisory Council. He is also a board member and
past treasurer of the National Civic League, has been a juror for the All
American Cities award program, and has spoken widely before both
investor and issuer groups.
Representative James L. Oberstar, an 11-term Member of Congress,
serves as the Senior Democrat of the House Committee on Transportation
and Infrastructure. From 1989 to 1994, he served as the Chairman of the
Aviation Subcommittee. As such, he has been a principal author of much
of America’s transportation legislation during the past two decades,
including the Aging Aircraft Safety Act of 1991, the landmark Intermodal
Surface Transportation Efficiency Act of 1991, and, most recently, the
Transportation Equity Act for the 21st Century, which provides a
40-percent increase in funding for federal transportation programs.
Representative Oberstar has taken a leading role on such issues as rail
safety, improving railroad infrastructure, developing high-speed intercity
rail, expanding mass transit, protecting environmental statutes, expanding
facilities for bicycle and pedestrian travel, and aviation safety. He has held
a number of memberships including membership in the Great Lakes Task
Force; Renewable Energy Caucus; House Trails Caucus; and Forestry
2000. He has also received a number of awards, including the James L.
Oberstar Award, from the League of American Bicyclists, and the Award
for Excellence, from the National Association of State Aviation Officials.
Les Sterman, Executive Director of the East-West Gateway Coordinating
Council since 1983, a position he assumed after working for 5 years as the
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Appendix XI
Profile of Speakers
organization’s Director of Transportation Planning. Responsible for some
of the Council’s largest and most visible projects, he conceived and
planned the MetroLink light-rail system. He has spoken on metropolitan
transportation, urban development, and environmental issues at the state
and national levels, testifying before several congressional committees and
national conferences on these topics. Before assuming his current
position, he worked as a transportation planning consultant and civil
engineer. He is currently President, Missouri Association of Councils of
Government, and Co-Chair and Founding Member, National Association of
Metropolitan Planning Organizations, as well as a member of several
governing boards of transportation-related organizations.
Brian Taylor, Associate Director of the Institute of Transportation
Studies, University of California/Los Angeles (UCLA), and Associate
Professor of Urban Planning at UCLA’s School of Public Policy and Social
Research. He teaches courses in transportation policy and planning, and
urban policy planning. His current research is on the politics of
transportation finance and planning, including the history of highway
finance and the effect of public transit subsidy programs on system
performance and social equity. Professor Taylor has also examined the
relationships between transportation and urban form, including the effects
of suburbanization on access to employment and the evolving commuting
patterns of women, minority, disabled, and low-income workers. He was
previously an Assistant Professor in the Department of City and Regional
Planning at the University of North Carolina/Chapel Hill and a
transportation analyst for the San Francisco Bay Area Metropolitan
Transportation Commission.
C. Michael Walton, Professor of Civil Engineering, holds the Ernest H.
Cockrell Centennial Chair in Engineering at the University of
Texas/Austin. He has a joint academic appointment at the Lyndon B.
Johnson School of Public Affairs. He formerly served as Transportation
Economist, Office of the Secretary, DOT, and Transportation Planning
Engineer, North Carolina State Highway Commission. A member of the
National Academy of Engineering, Dr. Walton has served on or chaired a
number of national study panels, some mandated by the Congress and
others by the National Research Council. He is a founding member of the
Intelligent Transportation Society of America and currently chairs its
Coordinating Council. He is a Fellow of the American Society of Civil
Engineers and of the Institute of Transportation Engineers. He also holds
many other positions within the transportation profession’s technical
societies and industrial boards. Dr. Walton has received numerous awards,
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Appendix XI
Profile of Speakers
contributed to more than 200 publications, and delivered several hundred
technical presentations.
Page 82 GAO/RCED-99-176 Surface Transportation
Appendix XII
Major Contributors to This Report
Joseph Christoff
Susan Fleming
Libby Halperin
David Lehrer
Ronald Stouffer
(348135) Page 83 GAO/RCED-99-176 Surface Transportation
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